By Abhijith Ganapavaram and Allison Lampert
(Reuters) -Spirit AeroSystems is looking to improve its liquidity, the aerospace supplier said on Tuesday, after its net loss more than doubled in the first quarter due to lower 737 production at its biggest customer, Boeing.
Shares of Spirit fell 4.5% before the opening bell, after the Wichita, Kansas-based company burned more cash than expected, using $444 million in the three months ended March 28, compared with $69 million a year earlier.
Analysts on average were expecting usage of $108 million for the quarter, according to LSEG data.
The net loss more than doubled to $617 million.
Spirit Aero reported $352 million in cash on hand, creating an urgency to access liquidity or complete a tie-up now under discussion with Boeing. The supplier also has nearly $1.8 billion worth of inventory.
Spirit again refrained from offering a financial forecast for 2024 and recorded losses on its A350 and A220 parts programs for its other main client Airbus.
“Ultimately we don’t expect Spirit to be a public company for that much longer, and the outlook for the share price is wholly dependent on the company reaching a disposal agreement with Boeing and Airbus,” Vertical Research Partners aerospace analyst Robert Stallard said in a note to clients.
“These results could play a part in this process, as they highlight just how desperate Spirit’s financial position has become.”
PRODUCTION DELAYS
Already wrestling with money losing programs, Spirit is facing the added challenge of slumping 737 production due partly to Federal Aviation Administration (FAA)-imposed quality checks following a January mid-air door panel blowout on a near-new 737 MAX 9 aircraft.
Spirit produces the fuselage for the 737 MAX which Boeing has pledged to ramp up in the back half of the year.
The 737 production problems come as the aerospace sector is already struggling with supply chain snags that have also delayed plane deliveries by Boeing’s rival Airbus.
Spirit’s current Boeing 737 production rate is approximately 31 aircraft per month, which the company expects to be constant through the end of 2024.
Airlines and lessors have called out both Boeing and Airbus for delivery delays due to production challenges and supply chain issues.
Dubai carrier Emirates’ CEO Sheikh Ahmed bin Saeed Al-Maktoum said on Tuesday he hoped Boeing’s new management will put in the effort to fix delays that have plagued its 777X aircraft.
Spirit said it is pursuing various options to improve liquidity.
Boeing’s discussions to acquire Spirit have hit a roadblock with Airbus asking to be paid to take on the supplier’s money-losing operations, Reuters reported last week.
Compounding the company’s cost concerns, Boeing has clamped down on traveled work – a practice of completing work on a production line out of the ordinary sequence – and has said it would take only fuselages that adhere to quality standards.
Sales to the U.S. planemaker accounted for 64% of Spirit’s revenues last year.
Spirit recorded losses of $280.8 million and $167.0 million on the Airbus A350 and the A220 programs, respectively, as it has yet to reach a deal with the European planemaker to mitigate higher costs.
The quarterly adjusted loss per share widened to $3.93 from $1.69, while revenue rose 19% to about $1.7 billion on higher overall sales from its commercial, space and defense programs.
Analysts, on average, were expecting a loss per share of 48 cents according to LSEG data.
(Reporting by Abhijith Ganapavaram in Bengaluru and Allison Lampert in Montreal; Additional reporting by Siddarth S in Bengaluru Editing by Sriraj Kalluvila and Sharon Singleton)
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