Cessna earnings buoy Textron’s bottom line
While Textron said last month that its finance unit dragged down income in the third quarter, dropping year-over-year from $225 million to $210 million, revenue and profit at its Cessna Aircraft division increased by $150 million and $16 million, respectively, over the same three-month period last year. The Wichita-based aircraft manufacturer’s backlog held strong at $15.6 billion as of September 30, up $3 billion from the end of last year, but Textron chairman, president and CEO Lewis Campbell remains cautious.
Of the orders for 484 Citations placed so far this year, only 47 were logged in the third quarter. “The order downturn has arrived more quickly than what we were expecting,” Campbell said, “as the events of the past several weeks have put a big chill on the market.”
Fortunately, he noted, Cessna has “a large and robust backlog of more than 1,500 jets, which includes many customers who are interested in taking deliveries earlier.” According to Campbell, Cessna is now contacting position holders “so we can be prepared early in this cycle” in case it needs to move up deliveries.
On a more positive note, Cessna delivered 124 jets in the quarter– which Campbell noted is “an all-time quarterly high”–compared with 103 in the third quarter last year. The manufacturer is expected to ship about 140 business jets in the current fourth quarter, which would set a new quarterly record high. Textron forecasts that Cessna will deliver 535 Citations next year, which would top this year’s expected record of 477 jet shipments.
But beyond next year, Campbell’s crystal ball gets a little cloudy. “We remain comfortable with next year’s production plan at this point,” he said, “but beyond that, frankly, we are taking a wait-and-see attitude with respect to how demand develops from here.”
However, Campbell sees a silver lining in the sluggish orders, allowing Cessna to work down the backlog and decrease the order-to-delivery lag time, which is now typically three or four years. “We don’t need a lot of net orders to sustain our production in 2010 and 2011,” he said. “Beyond that, we continue to have faith in a healthy long-term systemic global demand and we have a robust new product pipeline over the next 10 years as well. In the meantime, we are carefully monitoring the situation and will make sensible adjustments at the appropriate time if necessary.”
Like other business jet manufacturers, Cessna has received an increasing number of international orders–in fact, 68 percent of its booked orders come from non-U.S. customers. Europe accounts for half of Cessna’s international orders, with the balance coming from Asia (more than 10 percent), the Middle East and Africa (less than 10 percent) and Latin America (27 percent).