- French firm lowers forecasts
- Blames supply-chain issues
- UK companies closely linked
UK aerospace and defence suppliers were knocked lower by a warning from Toulouse-based Airbus (AIR:EPA), which cut both its production forecast and its earnings outlook for this year due to continuing geopolitical and supply chain tensions.
UK engineering companies such as Rolls-Royce (RR.) and Melrose (MRO), together with European manufacturers like MTU Aero Engines (MTX:FRA) and Safran (SAF:EPA), supply key parts for Airbus aircraft.
Shares in Rolls-Royce, which have gained almost 60% year-to-date, dipped 16p or 3.5% to 455p, while Melrose shares lost 25p or 4.5% to 556p.
Shares in Airbus itself fell €16 or 11% to a six-month low of €133, wiping more than €10 billion from the group’s market value.
SUPPLY CHAIN SNAGS
When it reported its first-quarter results in April, Airbus said it expected to deliver 800 commercial aircraft this year and to report adjusted EBIT (earnings before interest and tax) of between €6.5 billion and €7 billion.
However, on its website the company updated its guidance to around 770 deliveries and an adjusted EBIT target of ‘around’ €5.5 billion due to persistent supply-chain issues in engines, aerostructures and cabin equipment which have slowed aircraft production.
The firm also delayed its monthly production target of 75 A320 narrow-body aircraft by a year from 2026 to 2027, although it kept its A330 wide-body and A350 output forecasts.
Airbus had widely been seen as winning ground from US rival Boeing (BA:NYSE) as the latter struggles with production issues on its 737 MAX jets following several incidents earlier this year, leaving airlines scrambling for aircraft to meet strong demand for international travel.
The European firm also revealed it would take a €900 million charge in its first-half results for issues in its space division where it has ‘reassessed’ the risks and costs of some of its programmes.
