Meggitt Cuts Sales Forecast on Dollar, Production SnagsRobert Wall
Meggitt Plc, a provider of wheels and brakes for aircraft, plunged after cutting its full-year sales forecast because of issues including production problems and a weaker dollar hurting results in sterling.
The stock fell 11 percent, the most since September 2001. Revenue this year will grow by low single-digits compared with a previous forecast of a mid-single-digit increase, the Christchurch, England-based company said in a statement today.
Meggitt said it experienced “short-term” production problems at its sensing systems unit and also made a 20 million-pound ($32 million) provision to reflect a raw material supply issue, whose full costs are uncertain. The company’s energy business was affected by the timing of payments on some contracts, it said.
“We see this as a big and unexpected surprise,” Chris Dyett, an analyst at Investec, said in a note. Investec cut its recommendation on the stock to hold from add, and reduced its price target to 515 pence from 600 pence.
The shares closed at 509 pence in London, paring the advance to 33 percent this year. Trading volume was more than five times the three-month daily average as Meggitt’s market value declined by 502 million pounds.
UBS AG analysts warned on Oct. 29 that the dollar’s drop threatened results at aerospace and defense companies. As 60 percent of Meggitt’s sales come from the U.S., a 1 cent move affects profit by about 0.4 percent, UBS said. The dollar fell more than 5 percent against the pound in the past three months.
Business since July 1 “has been slightly below expectations,” Meggitt said. Sales should rise by a mid-single digit rate next year at constant currency, according to the statement.
The forecast adjustment is the first for Stephen Young who became chief executive officer six months ago after serving as finance chief.
Military revenue remained flat, despite mandatory spending cuts by the U.S. government, Meggitt said.
Savings generated from the integration of Pacific Scientific Aerospace, have reached $25 million against a target of $18 million, the company said. Meggitt purchased the unit in 2011 for $685 million and continues to look for acquisitions.