Arconic is likely going to join the list of companies adversely impacted by Boeing’s production moratorium on its 737 MAX aircraft.
The US specialty aluminum manufacturer provides metals for the defense and aerospace industries, and implied its profitability in 2020 would remain unchanged from last year at around $13.9-14.2bn. Supplying the 737 MAX comprised approximately 8-9pc of Arconic’s total revenue, the losses of which, the company estimates, will be $400mn in 2020.
During a teleconference with analysts, the company hinted that it might reduce the subset of its workforce tasked with production for the Boeing line by mid-2020, although it won’t act hastily. The metals manufacturer reported that, despite anticipating flat aerospace sales this year, it expects to 1-3pc growth in total sales, which will be driven by other non-MAX aerospace and defense contracts.
The company reported sales rose $38mn in 2019, driven by aerospace and industrial use contracts. However, it also indicated that the positive results derived from the former offset the latter’s weak sales in the automotive and commercial transportation sectors.
Arconic’s engineered products and forgings business segment reported growing revenue by 5pc to $7.1bn in 2019, with an operating profit of $1.4bn, which was a $285mn increase over 2018. Cost reductions, favorable product pricing, lower raw materials costs, and larger sales volumes drove revenues.
A weak automotive sector along with flat building and construction markets impacted the company’s global rolled product revenues, which declined by 2pc from 2018. However, its operating profit rose by $144mn in 2019 to $625mn.
Arconic also reported fourth quarter revenues decreased by 2pc to $3.4bn compared to Q4-2018.