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Umeco profits hit following delays to Boeing programme
DELAYS in developing a major aircraft contributed to a drop in profits at Umeco, the advanced composite materials and supply chain services company which has an operation in Yorkshire.
The company said it was "disappointed" by Boeing's announcement of further delays on its B787 programme, because its original forecast for the year had included revenue from this "very important" new aircraft.
However the company expected that it would enjoy a growing revenue stream from the aircraft from next year
Umeco, which employs 50 people at its process materials Aerovac factory in Keighley, West Yorkshire, saw its revenues increase by 1.2 per cent to 199.6m in the six months ended September 30.
However, adjusted pre-tax profit fell by 27.7 per cent to 9.4m as it faced tough economic conditions.
Clive Snowdon, the chief executive of Umeco, said: "As indicated in our July 2009 interim management statement, the key markets we serve have been significantly affected by the economic downturn resulting in lower demand for our products and services compared to the first half of last year, which saw very buoyant demand.
"We have continued to take action to lower costs, succeeded in significantly reducing net debt and improved our working capital position. Our long-term financing was secured in June 2009."
Mr Snowdon said he remained confident the company's long-term prospects were robust.
He added: "Our focus in the short to medium term is to be vigilant to changing conditions and to navigate the group successfully through these difficult times." The company's customers include Rolls-Royce, BAE Systems, Safran Group, Parker Aerospace, and the US Department of Defence.
In a statement to accompany the results, Umeco said its weakest market segments were regional and business jets, wind energy and motor sport.
The statement added: "While we do not expect the business jet market to recover for some time we are seeing a recovery in orders from the fast growing Chinese wind energy market and also in motor sport, where the well documented issues in the F1 world delayed the placement of orders until much later in the year than usual.
"A sustained improvement in these two key markets would bode well for our second half performance, which will also be enhanced by our cost reduction programmes."
The company added: "During the first half year, as markets weakened, we deferred a number of capital investment programmes which would support the long term growth of our Composites operations. These will be re-introduced as soon as we see tangible signs of recovery."
Cost reduction programmes had been implemented across all business units, including a headcount reduction of 8 per cent.
Commenting on its prospects, the company said: "The global economic downturn has resulted in falling air travel in 2009, though the decline now appears to have slowed considerably. This has led to carriers reducing their capacity, lowering their maintenance spend, destocking and deferring deliveries of new aircraft. However, at September 30 2009, Airbus and Boeing had a backlog of 6,915 orders which compares well with 7,293 aircraft at March 31 2009. They are expected to deliver 960 aircraft in 2009, although a lower level is forecast for both 2010 and 2011. Boeing is now forecasting that deliveries of the B787 will commence in quarter four 2010 and Airbus continues to commit considerable funds to the development of the A350.
"These factors, coupled with the delay in the B787, have resulted in lower demand for our products and services from existing customers."
Vital role in aerospace and defence
Umeco provides distribution and supply chain management services to the aerospace and defence industries.
The company also has manufacturing interests in advanced composite materials for a range of applications in the aerospace and defence markets and other technology industries. Umeco is managed through two divisions: Umeco Supply Chain provides distribution and supply chain management services to customers in the aerospace and defence market.
Umeco Composites provides a range of advanced composite materials, mainly to the aero-space, motor sport, automotive and wind energy markets.
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