Boeing Q4 profits fall despite 19% sales jump

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Boeing saw a 30% decline in fourth quarter earnings despite a surge of commercial aircraft deliveries, but offered no clues to investors about the impact of a battery-related 787 fleet grounding on financial results this year.

Net earnings in the period to 31 December 2012 declined to $978 million compared with $1.39 billion in the same period a year ago, resulting in a 3% decline in full-year income to $3.9 billion on a 19% jump in revenues, Boeing says.

A 29% improvement in commercial aircraft deliveries to 165 during the fourth quarter fueled the company's revenue gains, but it was not enough to overcome a sluggish performance in the company's defence business, which reported operating income down 3% on a 2% increase in revenue.

Boeing Commercial Airplanes (BCA) recorded an operating profit of $1.27 billion in the period on revenue of $14.2 billion, a 29% improvement in profitability compared with the previous year. Full-year results show that BCA increased revenue by 36% to $49.1 billion and operating earnings by 35% to $4.71 billion.

"Strong fourth quarter operating performance capped a year of significant growth and solid execution, driving higher earnings and cash flow for our company," says Boeing chairman, president and chief executive Jim McNerney.

The 787's battery-related problems continue to overshadow a stellar 2012 for Boeing's commercial business. For the first time in more than a decade, Boeing beat Airbus in both orders and deliveries last year, led by a surge of 737 Max sales and rising output of the 787 and 747-8.

But a parked Japan Airlines 787 developed a battery problem and caught fire on 7 January. Nine days later, another battery failed on an All Nippon Airways 787 over Japan. The US Federal Aviation Administration ordered United Airlines to ground its 787 fleet, and the move was copied by civil aviation authorities around the world.

The battery incidents remain under several over-lapping investigations in the USA and Japan, and have yet to identify the root cause of the failures in either incident.

"Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers," McNerney says.

Boeing says that 787 production will continue while the investigations proceed, but deliveries remain suspended until the FAA clears the aircraft to return to flight. Boeing's latest forecast now shows plans to deliver at least 60 787s in 2013, or a rate of five per month. It was not immediately clear why the monthly delivery rate is lower than Boeing's projected production rate, which is expected to increase 7.5 per month by mid-year and 10 per month by end-year.

Boeing has not altered its 2013 financial guidance to investors because of the 787 grounding. The company still expects to book revenues between $82-$85 billion on deliveries of between 635 and 645 commercial aircraft. It expects the split in revenues between commercial and defence to further expand, with BCA recording $51-$53 billion in sales and Boeing Defense, Space & Security booking $30.5-$31.5 billion.

Boeing expects to make 60 787 deliveries in 2013 despite the grounding, an increase of 14 over 2012.