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UK's Meggitt says supply snags overshadowing aerospace recovery

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By Reuters

By Yadarisa Shabong

-British aircraft parts maker and takeover target Meggitt warned of lower annual revenue and profit on Thursday as supply chain problems and a weak defence market outweigh a recovery in civil aerospace.

The company, which supplies wheel and brake systems for military fighter programmes, said raw material and labour shortages seen in the third quarter were expected to persist into the fourth.

A soft defence market is also hurting its business, it said, as customers lowered spending and purchases of parts as they use up stock-piled items from last year.

Those issues have clouded a recovery in its civil aerospace division, which saw revenue in the three months to September up 29%, but the reopening of transatlantic travel bodes well for the future, Chief Executive Tony Wood said in a conference call with analysts.

Meggitt makes components for aircraft makers such as Boeing and Airbus and is one of many companies struggling with supply chain difficulties as economies reopen from COVID-19 lockdowns.

Europe’s Airbus on Thursday lifted annual profit targets, but also said it was facing problems in getting parts on time.

Wood said Meggitt was working on a day to day basis to try and mitigate supply chain disruptions, curtail lead times and look for alternatives for electronic parts.

The company is set to be taken over by U.S. peer Parker-Hannifin in a 6.3 billion pound ($8.67 billion) deal that is expected to close in the third quarter of next year, despite a probe in Britain over national security concerns.

Annual revenue is expected to be 5% lower on an organic basis and underlying operating profit between 170 million to 190 million pounds ($261.04 million). It reported 2020 revenue of 1.68 billion pounds and underlying operating profit of 190.5 million pounds.

Shares in the FTSE 100-listed company were flat by 0832 GMT.

($1 = 0.7267 pounds)