Are new beginnings becoming a habit for Leonardo? The Italian aerospace champion formerly known as Finmeccanica has set the scene for disappointment with its 2017 results, due to be published on 14 March, by unveiling a “new industrial plan” designed for a return to “steady, sustainable growth”.
Indeed, in presenting this plan to investors and analysts gathered at the company’s helicopter assembly site in Vergiate, about half an hour’s drive from Milan, chief executive Alessandro Profumo made clear that what he called a “reset” in 2017 was – his word – “disappointing”.
In context – the context of concern to Profumo, who was brought in to head the group in May 2017 – the comparison is with 2015, when the then-Finmeccanica returned to profit for the first time since 2010, and to 2016, when solid growth saw revenue exceed €12 billion ($14.9 billion) and net profit before extraordinary transactions nearly double, to €545 million. And, perhaps most critically, 2016 was the year that saw return on sales climb into double digits at 10.4%.
Whatever the full-year disappointment proves to be, it will be in line with the third quarter numbers. Although not explicitly described as a disappointment at the time, year-on-year performance for the nine months to end-September certainly made for disappointing reading: revenue down 0.6% to just short of €8 billion, net profit down 23% at €272 million and group debt up nearly 3% to €4 billion. With those Q3 numbers came a reset of expectations for the year, and now Profumo is telling investors to expect full-year performance towards the lower end of that guidance range. That is, revenue around €11.5 billion and profit (EBITA) below €1.1 billion, compared with the €1.25 billion returned in 2016.
In Vergiate, Profumo spelled out Leonardo’s plan for returning to double-digit return on sales by 2020. Following a 2018 of “consolidation”, profitability should “accelerate” to 2022, built on a base of an enhanced global sales effort and cost control but not cost cutting. That is, Leonardo recognises why it stumbled in 2017 and will move decisively to correct “self-inflicted” setbacks that sowed problems on the helicopters assembly line. But Profumo stresses that the company has absolute confidence in its products and people. That “steady, sustainable growth”, he promises, will follow from careful attention to execution and continued investment in its three core businesses of aeronautics, helicopters and electronics.
This new industrial plan, then, feels like attention to detail and maybe opening up the throttle a bit rather than any new beginning. Indeed, Profumo – supported by helicopters division chief Gian Piero Cutillo, chief financial officer Alessandra Genco and chief commercial officer Lorenzo Mariani, who will lead an expansion of overseas sales offices to target some €20 billion of new business from 70 contract competitions, not counting really big-ticket jobs like the US Air Force’s T-X trainer – says the “one company” plan initiated by his predecessor, Mauro Moretti, remains the foundation of Leonardo’s face to the world.
Where Finmeccanica was a financial holding company running nominally independent business units, Moretti brought them into what he called, back in 2016, a “great integrated industry” capable of building solutions to particular challenges by seamlessly drawing on talent and capabilities from across the group. Moretti, of course, even renamed the company Leonardo, in part to underscore its new structure.
Profumo likes that “one company” model and is going so far as to call his plan to press ahead with it “Leonardo 2.0”. We will, he told investors and analysts, “continue the essential redevelopment of the organisation to leverage our key strengths”.
AFTER THE CRISIS
Profumo’s vision of the coming five years should be seen in a context broader than 2017’s “reset” of expectations. He is the company’s fifth chief executive since a truly disastrous 2011, which saw it lose a staggering €2.4 billion before tax on revenue of €17.3 billion after taking a third-quarter charge of €753 million against its involvement in the Boeing 787 programme. The travails of 2011 followed a 2010 in which the then-Finmeccanica – for decades used by the Italian government, which today still owns 30%, as a catch-all holding company for industrial assets deemed economically or politically important in Italy – made a paltry net profit of €557 million on sales of €18.7 billion. That profit included €443 million netted from the partial sale of the troubled Ansaldo Energia power generation business.
The response to what was clearly a crisis was dramatic. When presenting the 2011 figures, then-chief executive Giuseppe Orsi – whose predecessor had resigned in 2011 under a cloud of bribery allegations – initiated a plan to sell off energy, rail and nuclear businesses to focus the group on aeronautics, helicopters and defence/security electronics. Orsi subsequently lost his job in the furore over yet another bribery scandal, connected to helicopter sales in India, though he was later exonerated of wrongdoing. But whatever the background turmoil – and more of that came last year when Moretti was hit with a seven-year prison sentence, which he is appealing, for his part in a fatal rail disaster in 2009, when he headed Italy’s state railways – Orsi’s vision of a restructured, aerospace-focused Finmeccanica has proved durable. Moretti and Profumo both built on it, but the core notions remain: focus on aerospace and increased responsibility for financial performance given to unit bosses.
Profumo’s career has been in banking and consultancy, so perhaps what appears to be a cautious approach and attention to detail is to be expected. Leonardo insiders describe him as one who takes the stage with confidence – as he certainly did at Vergiate – but does not need a stage to thrive. Leonardo, then, might be described as a normal company, looking ahead with the confidence that comes of being well-managed and sure of its capabilities. And that is one sort of very welcome new beginning.
Source: FlightGlobal.com
