Thursday, April 28, 2016
L-M Still Getting Its Head Around Sikorsky
Lockheed Martin’s leadership is still grappling with how to explain the near-term impact of Sikorsky’s acquisition on its own operations and finances.
“I am still getting my head around describing Sikorsky and what the expectation should be” for the unit’s impact, L-M EVP and CFO Bruce Tanner said in response to a financial analyst’s question this week after the aerospace and defense giant reported first quarter results.
Sikorsky’s performance in the quarter was “maybe slightly better than our expectations” from a revenue and an earnings-before-interest-and-taxes perspective, he said, adding that the parent company expects “sequential growth in sales at Sikorsky quarter over quarter” and similar results for the unit’s profit margin.
L-M’s overall Q1 net earnings slipped 9.6% to $794 million this year from $878 million for the same period last year. Net sales were up 15.7% over that period, from roughly $10.1 billion to $11.7 billion. That gain was supported substantially by a 51.8% leap in sales for L-M’s Mission Systems and Training segment, the home of Sikorsky since it was acquired from United Technologies Corp. in November.
That segment’s sales increase, in turn, “was primarily attributable to net sales of approximately $990 million from Sikorsky,” L-M said. It noted that financial adjustments to account for the acquisition were made in 2015’s Q4.
The segment’s earnings rose 23.1%, to $229 million from $180 million in 2015’s first quarter. (L-M’s Aeronautics segment earnings were up 15.9% to $420 million from $371 million on a 21.2% rise in earnings, to about $3.8 billion from roughly $3.1 billion. Earnings for L-M’s three other segments each dropped by double digits for the quarter.)
At Sikorsky, “significant progress was achieved on the CH-53K program for the U.S. Marine Corps,” said L-M Chairman, President and CEO Marillyn Hewson, noting the second prototype test Kilo made its first flight in February.
For commercial helicopters, “we're seeing some emerging interest from other customers beyond the oil and gas sector for S-92 platforms and we are pushing aggressively into the search and rescue, VIP transportation and international military segments,” Hewson said.
“We also see a significant potential to create additional value in these sectors in sustainment,” she said, pointing out that Sikorsky recently opened a state-of-the-art customer care center in Connecticut designed to enhance platform reliability and ensure 24-hr availability. “Overall, I remain enthusiastic about the opportunities for long-term creation of the rotary aircraft business to customers around the world,” said the L-M chief.