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Debt woes continue at Finmeccanica as aerospace business stalls

Finmeccanica’s aerospace business has turned in a weak performance for the nine months to end-September, with sales essentially flat at €8.38 billion ($10.49 billion) but profits (EBITA) slumping by a fifth to just €539 million as the bottom line slipped in every sector.

The exception was AgustaWestland helicopters, where profit was down 5.7% year-on-year to €379 million but would have “increased” if the impact of a 2013 net benefit from the closure of the VH-71 programme is disregarded. Sales gained 1.3% to €3.04 billion and new orders were up 37% to €3.08 billion, lifting the unit’s backlog by 3.1% compared with end-2013 to nearly €12.2 billion.

Revenue from aeronautics – including the civil and military Alenia aircraft and structures businesses – gained 16.5% to €2.14 billion, but profit declined 8.1% to just €148 million.

Mauro Moretti, the chief executive appointed earlier this year – who is determined to carry on the group’s ongoing restructuring around its aerospace businesses – will be most concerned by the defence and security electronics division, where US unit DRS is suffering in a soft defence market. Sales for the period were down almost a fifth to €969 million and the unit turned in a €27 million loss, compared with a profit of €82 million last year. By contrast, rest-of-world defence and security electronics performance, under the Selex banner, was sound: sales edged up to €2.27 billion, and profits more than trebled to €63 million.

Despite an improved performance from its long-troubled rail transport businesses, which are for sale as part of the refocus on aerospace, the group’s major financial problem – net debt – barely moved. Year-on-year, debt decreased by just €239 – essentially the net proceeds from the August 2013 sale to GE Aviation of its 14% stake in Avio Aero – to €5.35 billion.

That debt figure is not far off the $5.2 billion Finmeccanica paid for DRS just before the financial crisis struck in 2008 – a deal that at the time was heralded as a grand strategic stroke that would give Italy’s aerospace champion a firm footing in the then-booming US defence market.

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