Textron Sees Mixed Deliveries, Lower Profit in Q4

 - January 29, 2020, 11:00 AM
Textron Aviation delivered its first 13 Cessna Citation Longitude super-midsize twins in the fourth quarter of 2019. (Photo: Textron Aviation)

Textron Aviation’s deliveries, revenue, and profit were mixed in the fourth quarter of 2019, affected in part by waning demand for its legacy Citation jets and price inflation, parent company Textron Inc. announced today. For the period, 71 jets—including 13 Longitudes—and 59 turboprops were delivered by the Beechcraft and Cessna airframer.

That compares with deliveries of 63 jets and 67 turboprops in the same period last year. Meanwhile, deliveries of its new supersize Longitude certified in September 2019 lifted revenue 11 percent from the year-ago quarter to $1.7 billion, while profit fell to $134 million from $170 million, partly because of lower profit on the first Longitude deliveries—including its first to NetJets—as well as the mix of legacy jets.

Textron CEO Scott Donnelly reiterated that a December 27 explosion at Textron Aviation’s Plant 3 in east Wichita did not affect the new SkyCourier twin-turboprop development program and that the 12 people hospitalized by the explosion have returned home to recover. But the explosion will delay deliveries of legacy aircraft—at least 10 to 15 units—this year. “The plant did incur significant damage affecting our composite manufacturing operations and we are working to recover the entire facility. We do expect some disruptions that will impact our ability to complete and deliver aircraft in the first half of 2020. But we fully expect to recover by year-end with no impact to our annual plan.”

During the quarter, the company also announced a restructuring at Textron Aviation and its industrial business segment that resulted in the layoff of 875 workers, the bulk of which affected aviation and resulted in a fourth-quarter special charge of $72 million. The cuts reflected “the completion of a long period of new product development resulting in the entry into service of the Citation Latitude and most recently the Citation Longitude,” Donnelly said. “These actions are necessary to align our cost structure within the current and operating environment as we ramp up production of the Longitude, anticipate lower legacy aircraft demand, and reduce requirements for ongoing development programs.”

Looking ahead, Textron Aviation is expected to record 2020 revenue of about $5.4 billion—from $5.2 billion in 2019—and see a rebounding profit margin that Donnelly told analysts will initially be in the low single digits but climb to low double digits later in the year. The growth in profit margin will be largely driven by rising Longitude deliveries in 2020. “There’s always some cost as you roll out these things into the marketplace,” he said about the $28.345 million jet.

On a separate note, Donnelly told analysts on a conference call this morning that aftermarket revenue at Textron Aviation climbed 13 percent in 2019.

He also declined to comment on one analyst’s question about reports that Textron Aviation could be a suitor to acquire Bombardier’s business jet division.