GuruFocus -
- New Orders: Increased by 7.8% to EUR14.8 billion.
- Revenue: Grew by 12.4% to EUR12.1 billion.
- EBITA: Increased by 15% to EUR766 million.
- Return on Sales: Improved to 6.3%.
- Free Operating Cash Flow: Absorption of EUR550 million.
- Net Debt: Reduced to EUR3.1 billion from EUR3.9 billion.
- Helicopters Revenue: Increased by 13% to EUR3.6 billion.
- Defense Electronics Europe EBITA: Increased by 23% to EUR381 million.
- Leonardo DRS Revenue: Increased by 18% to over $2.2 billion.
- Cyber Orders: Increased by over 20% to EUR586 million.
- Aircraft EBITA: Increased by 1.7% to EUR246 million.
- Aerostructures EBITA: Loss of EUR129 million.
- Space Division Revenue: Increased to EUR527 million.
- Ordinary Net Income: EUR364 million.
- Net Result: EUR730 million, benefiting from capital gain on Tele Pacc consolidation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Leonardo SpA (FINMF) reported a strong financial performance with new orders growing by almost 8% and revenues increasing by nearly 12% year-over-year.
- EBITA grew by approximately 15%, reaching EUR 766 million, indicating improved operational efficiency.
- The company successfully reduced its net debt by 19%, showcasing effective financial management.
- The cybersecurity division experienced significant growth, with a 21% increase in orders and an 11% rise in revenues, reflecting successful strategic shifts.
- Leonardo SpA (FINMF) is actively pursuing international alliances, such as the joint venture with Rheinmetall (ETR:RHMG), to enhance its position in the global defense market.
- The aerostructures division continues to face challenges, with a reported loss of EUR 129 million in the first nine months, exacerbated by the Boeing (NYSE:BA) production slowdown.
- The space division, particularly the Telco satellite segment, is experiencing difficulties, impacting overall profitability.
- There are delays in some key aircraft programs, affecting the timing of order intake and revenue recognition.
- The company faces geopolitical uncertainties, such as potential changes in defense spending priorities due to political shifts in the US and Europe.
- Leonardo SpA (FINMF) is dealing with supply chain constraints, which could impact its ability to meet demand and maintain operational efficiency.
A: We have negotiated with Iveco Defense to act as subcontractors for the joint venture, potentially allocating 10% of the workload to them. This synergy could maximize productivity. We are open to discussing mergers or acquisitions, but for now, involving Iveco Defense as a subcontractor is the simplest solution.
Q: With the new US administration, how do you think the political landscape will impact your business and the defense sector?
A: The new US President wants Europe to be more active in NATO's global expenditure, which aligns with our view that Europe should strengthen its defense capabilities. This could benefit defense companies if Europe increases its defense budget. We focus on developing competitive, high-tech products and expanding into global security, which includes non-war-related markets.
Q: Can you elaborate on the timing and scope of finding a financial partner for the aerostructures division?
A: We are working confidentially with partners and will disclose more by Christmas. We prefer a strong alliance rather than just a production line partnership. If a large-scale solution fails, we might consider smaller partnerships, but our focus is on a significant transformation.
Q: Why are the GCAP and Rheinmetall joint ventures considered inorganic growth?
A: We categorized mergers and acquisitions under inorganic growth for simplicity. While these initiatives might seem organic, they align with our strategy of cash-free mergers and acquisitions within 15-20% of the division's turnover.
Q: When should we see profitability improvement in aerostructures, and how is the Telco satellite segment affecting the space division?
A: Aerostructures' profitability depends on external factors like Boeing's recovery. We aim for a breakeven by 2028-2029 if we stay inertial, but we're exploring alternative solutions. The Telco satellite segment is challenging, but we're working closely with Thales (EPA:TCFP) to address these issues and shift focus to more profitable areas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.