First-quarter revenue up, losses down at Cessna
- By Molly McMillin
- The Wichita Eagle
- Orders at Cessna Aircraft were higher in the first three months of 2012 than they were in the last three quarters of 2011 combined, and its customer prospect list continues to improve, company officials said Wednesday.
Revenue increased for the company, and losses decreased during the first quarter, as it delivered a higher number of airplanes, its parent company, Textron, reported.
Cessna posted $669 million in revenue in the quarter, compared with $556 million a year ago. It recorded $6 million in losses, down significantly from a loss of $38 million a year ago.
The company delivered 38 Citation jets in the quarter, compared with 31 a year ago, and it had higher after-market volumes.
Cessna’s order backlog fell in the quarter to $1.7 billion, down $167 million from the end of 2011.
The market is gradually improving, but Cessna’s performance was “still soft” and its business jet backlog continued to dwindle, RBC Capital Markets analyst Robert Stallard noted in a report to clients.
“With Cessna almost operating on a spot basis, it is ‘hope’ rather than ‘fact’ that supports the projection of a small business jet recovery this year,” Stallard wrote. “Eventually the market will pick up, but with minimal backlog it does mean that Cessna remains vulnerable to any market volatility, as seen in the middle of last year.”
Textron management remains confident that there will be a significant pickup in demand for Cessna’s products this year, Stallard wrote.
The ratio of book to bill, the number of orders taken compared to deliveries, is still below 1, Stallard noted. “But it has continued to improve.”
Morgan Stanley analyst Heidi Wood is projecting that orders will improve through 2012 from the lows of 2009 and 2010, she wrote in a report. Demand will be led by international markets, but bolstered by sales in the U.S. as business confidence and profitability return.
The mix of orders taken during the first quarter was favorable, Textron chairman and CEO Scott Donnelly said on a conference call with analysts Wednesday.
Demand is stronger for the Citation CJ4 and larger airplanes in Cessna’s lineup of products, than, say, the Mustang, Donnelly said.
Problems at Hawker Beechcraft could also present market share opportunities, Stallard noted.
The company would be interested in Hawker Beechcraft assets should there be a divestiture, Donnelly said in answer to an analyst’s question. He did not provide details.
“We keep an eye on that like most people,” Donnelly said about speculation on whether the financially troubled Hawker Beechcraft would file for bankruptcy. “There are certainly some assets there that we think would be very interesting.”
Cessna also announced during the first quarter a joint venture with China’s AVIC to develop Chinese aviation business.
“We expect that this agreement will lead to a number of business opportunities,” Donnelly told analysts.
Initially, the agreement will be for final assembly of Citation Sovereign business jets. Ultimately it is expected to include the development of a new aircraft.
That agreement positions Cessna well to participate in China’s growth market, Donnelly said.
Cessna’s parent company, Textron, recorded revenue of $2.86 billion during the first quarter, up from $2.48 billion a year ago. It posted net income of $118 million, compared with $29 million for the same period in 2011.
Reach Molly McMillin at 316-269-6708 or firstname.lastname@example.org