Oct 26 (Reuters) – Boeing Co ( BA.N ) on Wednesday unexpectedly reported a deeper third-quarter loss as cost overruns led to big losses in its ailing defense business, underscoring the challenge faced by the company to turn its fortunes around.
The Virginia-based planemaker is trying to get out of overlapping crises – the pandemic and the grounding of its best-selling model after fatal crashes, which left it in a pile of debt.
However, an increase in the costs of Boeing’s defense contracts along with continued supply chain constraints and regulatory hurdles have made it more difficult to strengthen its fortunes.
In the quarter through September, the company reported a $2.8 billion payment on Air Force One and the refueling tanker program, among others.
The latest writedown came a day after Reuters reported that Boeing had appointed a senior troubleshooter, Steve Parker, to help turn around its defense unit’s defense loss programs.
Rising cost pressures in the past few months have hampered fixed-price contracts for US aerospace and defense companies, prompting an industry body to ask the US Congress for inflationary relief.
Because these contracts have fixed prices, Boeing must absorb the cost increase. Agency Partners estimates that the company’s various price defense contracts have already resulted in $8.8 billion in charges.
“Every quarter, one hopes that the specific bad news program has ended, but then we get an installment – maybe this is it? Maybe not,” Agency Partners analysts said in a note.
Boeing shares were down 1.7% at $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, lower than its earlier target of “low 400s.”
Chief Executive Dave Calhoun said he is confident the planemaker will get an extension from the US Congress on 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 continue to challenge the industry.
It singled out jet engine delivery delays as the primary impediment to strengthening and increasing production rates for the 737 jets. It called the supply chain “a key watch item” in the near term for the production and delivery of the 787 jet as well.
Boeing expects the supply-chain to remain challenging through 2023. To increase production, the company said it is adding more than 10,000 employees this year and investing in training and development to improve productivity.
It maintained its forecast for cash generation this year after reporting a free cash flow of $2.9 billion in the September quarter, higher than the $1.02 billion expected by analysts in a Refinitiv survey.
Adjusted loss per share in the third quarter widened to $6.18 from $0.60 a year ago. Quarterly revenue rose 4% to $15.96 billion.
Demand in the global service business that provides spare parts and services such as jet conversion was a bright spot in the quarter to September, with revenue increasing by 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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