Zodiac Aerospace tackles seat output delays, sees shares going up

The logo of French aircraft seats and equipment manufacturer Zodiac Aerospace is seen during the company's first half of the 2015/2016 fiscal year presentation in Paris, France, April 20, 2016.  REUTERS/Benoit Tessier

 

PARIS / Reuters

Zodiac Aerospace has announced shortening of average delays in aircraft seat production to days rather than months, sending its shares higher in a respite from factory congestion which disrupted airplane deliveries.
The French aircraft interiors and systems manufacturer said it was on track to get its seats business back to normal within 18 months and also reiterated a recently revised target of roughly stable operating profit in its current financial year.
Shares in the company, which supplies Airbus and Boeing among other planemakers, rose as much as 8 percent on reassurances over seat production, buoyed by probable short-covering as the company broke with a pattern of disappointing updates, analysts said.
Chief Executive Olivier Zarrouati, under pressure over a series of profit warnings, said the company was coming out of a “crisis” that could not have been anticipated in a single announcement and that management could complete the recovery.
Production setbacks have caused volatility in Zodiac’s shares and strained relations with jetmakers in the past year.
After the company’s results presentation last week, analysts said maintaining stable operating profit this fiscal year would be a challenging task after operating profit more than halved to 80.4 million euros ($91 million) in the first half.
“The presentation was reassuring both in content and tone but to deliver a near tripling of operating profit in the second half still seems a little heroic,” said Harry Breach, European aerospace and defence analyst for Raymond James.
Zodiac said the rebound would be driven mainly by higher volumes and, “to a lower extent”, better cost control. It declined to give forecasts for 2016/17.
The company last month abandoned a target of reaching an operating margin of 10 percent this year.
It has been sharply criticised by executives from both Airbus and Boeing over chronic delays in the production of premier-class aircraft seats that have disrupted jet deliveries. Zodiac said most capacity issues had been addressed but that its own supply chain needed to be reinforced.It said it was also overcoming delays in aircraft toilet production that have held up some Airbus A350 deliveries.The company said it may have to modify some 6,000 seats currently in service as a result of discussions with the US Federal Aviation Administration (FAA), adding this was not due to an accident and that adequate time would be given for the changes.
Runway Girl Network, a news service specialising in aircraft interiors, reported the FAA was proposing to issue an airworthiness directive for the removal of certain Zodiac seat components.

Olivier Zarrouati, Chief Executive Officer of French aircraft seats and equipment manufacturer Zodiac Aerospace, poses before the company's first half of the 2015/2016 fiscal year presentation in Paris, France, April 20, 2016.  REUTERS/Benoit Tessier

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