Finmeccanica Plans Civil-Product Shift to Propel ProfitRichard Weiss
Finmeccanica SpA will scale back its product line and focus on non-military markets as the Italian defense manufacturer pushes to raise profit. The stock rose to a 3 1/2-year high as the company said 2014 figures beat forecasts.
Finmeccanica will expand in civil helicopters and sell more security-related products to match the 4 percent annual growth it’s projecting for markets it serves, Chief Executive Officer Mauro Moretti said on a webcast. Avoiding expensive acquisitions and making sure orders translate into earnings are key concerns to make up for earlier, unprofitable projects, he said.
“I have a strong, clear vision for the group,” Moretti said. “The next two to three years will be a tough turnaround. We will streamline the portfolio to fewer products and fewer businesses, but we will achieve more with this portfolio,” including developing items for both military and civil use.
Moretti, who took the helm at Rome-based Finmeccanica in May, is seeking to reduce debt while accelerating a shift to faster-growing helicopter, aerospace and defense-electronics businesses as military budgets in many of its markets continue to shrink. A crucial part of the strategy is the disposal of unprofitable trainmaking unit AnsaldoBreda SpA, which Moretti said today will probably happen “shortly.”
“It’s clear Finmeccanica is involved in too many products for a medium-sized company,” Moretti said. “We lack focus and we are wasting money,” as “we do a lot of things and we are not good at all in some of them.”
Excluding the AnsaldoBreda sale, projects to be ended amount to more than 300 million euros in revenue a year, according to an online presentation for the webcast. The manufacturer plans to save about 150 million euros by increasing efficiency and improving procurement, the CEO said.
Finmeccanica jumped as much as 4.6 percent to 9.44 euros, the highest intraday price since May 2011, and was trading up
2.9 percent at 9.29 euros as of 2:33 p.m. in Milan.
The company, 32 percent-owned by the Italian government, is valued at about 5.37 billion euros ($6.09 billion). That compares with about 16.1 billion pounds ($24.4 billion) for London-based competitor BAE Systems Plc and and $94.4 billion for planemaker and defense-technology manufacturer Boeing Co.
Sales, new orders and operating profit in 2014 probably exceeded the company’s predictions, Finmeccanica said. While profit will continue to rise this year, revenue and order intake may decline.
Finmeccanica lacks size in areas including aeronautics for military aircraft and unmanned aerial systems, underwater torpedoes and regional-aircraft components, Moretti said. Some businesses will be phased out while others will be restructured, and the company will review terms of involvement in the Superjet 100 regional-jet venture with Sukhoi Civil Aircraft Co.