GKN Braces for A380 Hit, Will Cut Helicopter Jobs as Demand Ebbs

  • Delayed ramp-up of new Airbus models also clipping earnings
  • Company is latest supplier to warn of production challenges

GKN Plc said it’s preparing to take an earnings hit as Airbus Group SE halves the build rate for the A380 superjumbo, and it may cut 230 jobs at a U.K. helicopter-parts plant as the aerospace industry wrestles with ebbing demand for older models and production glitches afflicting new aircraft.

Airbus’s decision to slash A380 output to 12 planes a year by 2018 will create “a profit headwind,” while Leonardo-Finmeccanica SpA’s moves to take assembly of the AW159 Wildcat helicopter in house could lead GKN’s factory in Yeovil, England, to close, the company said Tuesday.

A “slower than expected” acceleration of deliveries of Airbus’s latest A350 wide-body and the re-engined A320 single-aisle jet is also holding back profit, according to Redditch, England-based GKN. Other major aerospace suppliers, including U.K. manufacturer Senior Plc and Germany’s MTU Aero Engines AG, highlighted the impact of the ramp-up delays this week, while Cobham Plc issued its third profit warning in a year.

“We’re clearly not immune to changes in our customers’ build rates,” GKN Chief Financial Officer Adam Walker said on a call with analysts. “We try to read the signals and adjust accordingly. But you do find occasionally you’re going to get a buildup, particularly if there are other issues in the supply chain.”

GKN shares fell as much as 3.3 percent, the steepest intraday drop since July 4, and were trading 2 percent lower at 316.6 pence as of 12:20 p.m. in London, reducing the company’s market value to 5.43 billion pounds ($6.64 billion).

Zodiac, Pratt Delays

While the A380 and models including the Airbus A330 and Boeing Co. 777 are struggling amid a lack of demand, the introduction of upgraded variants or an influx of cheaper second-hand jets, the A350 and A320 upgrade are being respectively held back by delays at French seatmaker Zodiac SA and engine supplier Pratt & Whitney.

MTU, which makes parts for United Technologies Corp.’s Pratt unit, has been hit by the U.S. company’s move to cut deliveries this year by 25 percent, or 50 engines, it said Tuesday. The Munich-based company, which also has an 18 percent stake in the A320neo turbine project, fell as much as 4.4 percent and was priced down 3.4 percent at 92.90 euros.

Shares of Senior fell the most 15 years on an intraday basis Oct. 20 after the Rickmansworth, England-based company lowered its full-year earnings forecast, citing its own supply and pricing issues and the slower-than-expected A32neo and A350 ramp-ups. The manufacturer had been relying on aerospace sales to offset a worsening slump in demand at its truck business.

Cobham dropped 13 percent Monday after extending a run of profit warnings that prompted the appointment of a new chief executive officer in August. While Cobham has suffered waning demand for its satellite communications technology and operational issues at its wireless arm, the Wimborne, England-based company also said that its aviation-services unit is “still a very challenged sector.”

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