By Robert Wall
Shares of Meggitt PLC, a provider of wheels and brakes for aircraft, plunged Friday after the company cut its full year sales forecast because of issues including production problems and a weaker U.S. dollar hurting results in foreign currency exchange.
The stock fell 11 percent, the most since September 2001. Revenue this year will grow by low single-digits compared with a previous forecast of a mid-single-digit increase, the Christchurch, England, company said in a news release.
The company has an aircraft wheel and brake operations in Akron that formerly was known as K&F Industries and once was a part of Goodyear Aerospace.
Meggitt said it experienced “short-term” production problems at its sensing systems unit and also made a 20 million-pound ($32 million) provision to reflect a raw material supply issue, whose full costs are uncertain. The company’s energy business was affected by the timing of payments on some contracts, it said.
“We see this as a big and unexpected surprise,” Chris Dyett, an analyst at Investec, said in a note to clients. Investec cut its recommendation on the stock to “hold” from “add,” and reduced its price target to 515 pence from 600 pence.
The shares closed at 509 pence in London, paring its advance to 33 percent this year.
Analysts at investment bank UBS warned on Oct. 29 that the U.S. dollar’s drop threatened results at aerospace and defense companies. As 60 percent of Meggitt’s sales come from the United States, a 1-cent move affects profit by about 0.4 percent, UBS said. The dollar fell more than 5 percent against the pound in the past three months.
Business since July 1 “has been slightly below expectations,” Meggitt said. Sales should rise by a mid-single digit rate next year at constant currency, according to the statement.
The forecast adjustment is the first for Stephen Young, who became chief executive officer six months ago after serving as finance chief.
Military revenue remained flat, despite mandatory spending cuts by the U.S. government, Meggitt said.
Savings generated from the integration of Pacific Scientific Aerospace have reached $25 million against a target of $18 million, the company said. Meggitt purchased the unit in 2011 for $685 million and said it continues to look for acquisitions.