Wednesday, January 22, 2014
Textron Profits Rise on Cessna Deliveries
Textron Inc. reported net income of $167 million for the fourth quarter of 2013, up from $148 million during the same period in 2012. This gain marks the first quarterly profit after five straight quarters of decline for the world's largest business jet manufacturer.
Cessna M2 business jet. Photo, courtesy of Cessna.
Sales of business jets have been stagnant in recent years, as the General Aviation (GA) industry continues to recover from the global economic recession. However, Textron CEO Scott Donnelly told investors that his company expects sales to be up in 2014 and beyond as economies continue to recover and new airframes enter the marketplace.
Textron is forecasting 2014 revenues of $13.2 billion, which would be a 9 percent increase from 2013. That revenue growth will be driven by the introduction of several new business jets by Cessna, including the M2 and the new Citation Sovereign Plus, both of which were certified in December, and the new Citation X, which is on track for certification early this year, according to Donnelly.
"While we're not counting on a significant change in overall market conditions, we do expect full year deliveries of the M2 and new Sovereign Plus, and introduction of our new X will contribute to an increase in overall deliveries, which should in turn lead to an improvement in our profitability," said Donnelly.
Contrasting this quarter’s profits, the company experienced a sharp decline in deliveries of business jets for 2013, with a total of 139, down from 181 in 2012. But Donnelly is confident that deliveries will be up in 2014, banking on the introduction of new Cessna aircraft.
The chief executive said that the company's main competitor in recent years has been an "installed base of relatively new used aircraft." Cessna delivered a total of 12 M2 and eight new Sovereign jets following the certification of each, which came late in the fourth quarter. According to Donnelly, that shows that the market demand is there for new, more fuel efficient aircraft.
"Longer term we're still expecting overall jet growth to develop as global economies gain momentum … combined with additional new products that are introduced," said Donnelly, who added that the company's acquisition of Beechcraft Corp. places them in "a good position to capitalize on the rebound in the business jet and the overall General Aviation market."