Italy's aerospace and defence champion Finmeccanica has completed the latest stage of its transformation, posting a set of strong full-year results for 2015 as well as unveiling its new proposed identity, with the group from 1 January 2017 to be known as Leonardo.
Finmeccanica's 2015 financial performance would have more than satisfied most established industrial companies, but in the context of a half decade of financial and legal turmoil the full-year result counts as little short of a renaissance.
The good numbers have clearly been in the works for a year now – 2015 saw the first positive bottom-line result since 2010 – but a strong outcome for the year just past vindicates a turnaround strategy that has been five years in the making as management divested its loss-making rail and energy divisions to focus on its core aerospace and defence businesses.
It says: “All the profitability indicators showed a sharp improvement, both overall and in the main sectors." For the group, revenue was up 1.8% to €13 billion ($14.6 billion) and profit before interest and taxes soared 48% to €1.21 billion; return on sales increased by 1.6%, to 9.3%.
Crucially, a group net debt that had reached crippling levels during the worst of its troubles came down by more than 17% to less than €3.3 billion. “This significant growth is evidence of the actions taken to improve industrial process and optimise costs," it says.
Finmeccanica’s troubles date to a disastrous 2011 that saw a net loss of more than €2.3 billion on heavy losses in power, road and rail and a €750 million write-down against defects in fuselage sections and horizontal stabilisers supplied to the Boeing 787. Subsequent woes included allegations that AgustaWestland paid to win a lucrative sale of VVIP helicopters to India.
The plan to consolidate around aerospace, and tighten lines of management control while pushing responsibility for financial performance down to division and business level, was laid out in the wake of that 2011 shock.
For 2015, the AgustaWestland helicopters division saw revenues gain 2.4% to €4.48 billion and EBITA gain 2.8% to €543 million, though order intake was down 14.2% in a very soft helicopter market.
In aeronautics – the Alenia Aermacchi businesses – revenue edged down less than 1% but EBITA gained nearly a third (31.6%) to €312 million, with good results in a difficult global defence market helping offset the soft helicopter market.
A result that goes some way to vindicating what once looked like a grand strategic error came from the defence electronics sector, where EBITA more than doubled to €424 million on revenue up 5.7% to €5.27 billion. Significantly, the US side of that division – DRS – turned in a profit of €114 million, up from just €22 million in 2014. DRS was acquired, during a European push to buy into the then-booming US defence market, for $4.5 billion just before the financial crisis broke in 2008. The subsequent US defence spending squeeze has left the company struggling ever since.