Oct 26 (Reuters) – Boeing Co ( BA.N ) unexpectedly reported a wider third-quarter loss on Wednesday as cost overruns led to heavy losses at its ailing defense business, underscoring the challenge facing the company staring to turn his fortunes around.
The Virginia-based planemaker is trying to emerge from overlapping crises — the pandemic and the grounding of its best-selling model after fatal crashes, which left it with a pile of debt.
However, a run-up in costs in Boeing’s defense contracts along with continued supply chain constraints and regulatory hurdles have made it harder to bolster its fortunes.
In the quarter to September, the company reported a $2.8 billion charge on its Air Force One and fuel tanker program, among other things.
The latest write-off came a day after Reuters reported Boeing had hired senior troubleshooter Steve Parker to help turn around lossmaking programs in its defense unit.
Rising cost pressures over the last few months have hampered fixed-price contracts for US aerospace and defense firms, prompting an industry body to ask the US Congress for inflationary relief.
Since these contracts tend to have fixed prices, Boeing is expected to absorb cost increases. Agency Partners estimates the company’s various fixed-price defense contracts have already resulted in $8.8 billion in costs.
“Every quarter one hopes that the program-specific bad news has come to an end, but then we get another installment — maybe this is It? Probably not,” analysts at Agency Partners said in a note.
Boeing shares fell 1.7% to $144.55 in morning trading.
The company further cut estimates for 737 MAX deliveries this year. It now expects to deliver 375 planes this year, down from an earlier target of “low 400s.”
CEO Dave Calhoun said he was confident the planemaker would get an extension from the US Congress of a key deadline to get the MAX 7 and MAX 10 certified.
The company said that while demand for commercial aircraft remains strong, supply chain constraints will continue to challenge the industry.
It singled out delays in jet engine deliveries as the primary constraint in stabilizing and increasing production rates for 737 jets. It called the supply chain “a key watch item” for the production and deliveries of 787 jets in the near future.
Boeing expects the supply chain to remain challenged throughout 2023. To increase production, the company said it added more than 10,000 employees this year and invested in training and development to improve productivity.
It maintained its forecast to generate cash this year after reporting free cash flow of $2.9 billion in the September quarter, higher than the $1.02 billion analysts had expected in a Refinitiv survey.
Adjusted loss per share in the third quarter increased to $6.18 from $0.60 a year ago. Quarterly revenue rose 4% to $15.96 billion.
Demand at the global services business, which provides parts and services such as jet conversions, was a bright spot in the quarter to September, with revenue up 5%.
Reporting by Abhijith Ganapavaram in Bengaluru and Rajesh Kumar Singh in Chicago; Editing by Arun Koyyur, Kirsten Donovan and Nick Zieminski
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