Chris Jasper/LONDON

Aircraft interiors specialist B/E Aerospace has issued a profits warning for its current fiscal year and the next after experiencing major difficulties in its seating products group, the largest single element of B/E's business.

Florida-based B/E, the world's largest manufacturer of aircraft seats, blames production problems in its seating unit for charges totalling $82 million which it says must be absorbed over the next three months.

B/E says its problems relate to the large number of new products it has been introducing, coupled with failures in the manufacturing process and the simultaneous implementation of a new management information system.

The company, which recently announced its intention to leave the in-flight entertainment (IFE) sector, says its margins first came under pressure in the latter part of FY1999 - which ended in February - and that expected improvements have failed to materialise.

B/E's problems have led to increased rework of seats and delayed deliveries to customers, causing some airlines to divert seating contracts elsewhere, or to defer programmes to mitigate delivery risk. The interiors giant expects to take a loss for the third quarter of FY2000, which ended on 27 November. It hopes to return to profitability this quarter, but its seating crisis will affect results well into FY2001.

B/E's charges will be made up of a $25 million hit in the quarter just ended for late penalties, out-of-sequence costs, warranty costs, delivery-expediting costs and other customer concessions, $33 million for product cuts, facility consolidation and job losses, and $24 million - to be taken by the end of its current quarter - relating to production and engineering inefficiencies.

Anticipated sales for FY2000 are $715-$720 million, accompanied by a record net loss of $1.50-$1.60 per share. Revenues for FY1999 were $701 million, of which seating products contributed $296 million, or 42%. FY2001 sales are expect to fall to around $650 million, albeit with modest profitability restored. B/E can produce up to 200,000 seats a year, or more than 50% of the annual world requirement.

Source: Flight International