IN FOCUS: Avio in shape for IPO

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This story is sourced from Flight International
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If any company is in a position to ride the wave of airliner delivery growth, it is Avio, the Italian manufacturer of engine components. Its first-half revenue of €1.13 billion ($1.48 billion) represents a 25% premium over the equivalent period last year and, with Boeing demanding an increasing number of General Electric GEnx powerplants now that 787 and 747-8 deliveries are gaining momentum, such growth looks set to continue.

Giulio Ranzo, Avio's executive in charge of corporate strategy, says strong demand from all engine makers is driving "substantial" growth across the product range. As well as GE, Avio is a partner to Pratt & Whitney (including on its PurePower PW1500G geared turbofans for the Bombardier CSeries and Airbus A320 neo), Safran (collaboration on Ariane rockets now extends to the SaM146 powering the Sukhoi Superjet 100) and Rolls-Royce (including the Trent 900 used on Airbus A380s).

Other Avio outlets include Eurojet (Eurofighter Typhoon) and MTU. Indeed, the military engine components business also showed strong growth in the first half of 2012 of about 7%, with much help from helicopter engines demand.

So far, the company has also had a good year in spaceflight. As perhaps the leading industrial player in the Italian-driven project to develop the new European Space Agency Vega light launcher - which made its successful maiden flight in February - Avio is rightly pleased with this relatively small sector. As Ranzo puts it, space - and particularly Vega - is a strategically important vehicle for Avio to show its prowess as a systems integrator in a highly visible venture that is also of strategic importance to Europe if it is to maintain its independent capability to access space.

 

Avio is the leading industrial player in the development of ESA's Vega light launcher                          
ESA

For good measure, Avio's energy and industrial markets revenue grew 40% to €115 million during the first half, on the back of a "significant uptick in volume" and some help from foreign exchange rate movements. Ranzo describes that performance as a "surge" that will not continue for long, but notes that all sectors are contributing to what looks like being a good year.

But civil aero engine components are, without question, Avio's core business. Recently, says Ranzo, growth has been linked loosely with aircraft deliveries. Significantly, he says, Boeing was applying a lot of pressure earlier this year to keep its suppliers on schedule, and the connection between that preparation and delivery rates is starting to come through.

For 2013, growth throughout the civil aerospace industry will depend on a "very efficient supply chain". As Ranzo puts it: "The delivery machine needs to be tight."

Avio has been working very hard for four or five years on its own supply chain, he says, including by insourcing some work, and the company thinks it is ready for a surge in output if that is called for up the chain.

Avio may also be poised to make waves on the stock market. Since 2007, the company has been owned by private equity investor Cinven - which bought it from Carlyle Group, Avio's owner since 2003 - and Finmeccanica, which holds a 14% stake. Plans to go public on the Milan stock exchange in the first half of 2011 were shelved because of market conditions, but the IPO remains a live option.

Noting that the "industry continues to be vibrant", Ranzo says that "hard work" on the flotation resulted in clearance from Italian regulators in June 2012, which remains valid for 12 months. The company could therefore go to market at any time after publishing details of its offer. The summer is a poor time for a launch, because it is hard to make deals during the holidays and markets tend to be volatile.

But, Ranzo says, management must remain ready to go "at any time".