Heroux-Devtek Inc. swung to a net loss in its latest quarter as the landing-gear manufacturer felt the impact from severe turbulence in the global aerospace industry caused by the COVID-19 pandemic.
The Quebec-based company said it lost $1.3 million or four cents per share in its fiscal first quarter, down from a net profit of $6.4 million or 18 cents per share a year earlier.
Civil aviation sales plummeted by 26 per cent year over year to $50 million as twin-aisle aircraft deliveries dropped by nearly half amid the collapse of commercial air travel across the globe. However, defence sales proved resilient, rising three per cent to $78 million.
Defence orders now comprise two-thirds of the company's $772-million backlog — the order sheet is five per cent smaller than a year earlier — and "will allow us to weather the storm," CEO Martin Brassard said in a statement.
"Our first quarter results were encouraging given this turbulent environment. We remained profitable and generated free cash flow that are helping us maintain a healthy balance sheet. The restructuring measures we announced in May are also proceeding according to plan," Brassard said.
The company announced in May it would cut 225 employees or 10 per cent of its workforce and close its business unit formerly known as Alta Precision — a Montreal-based landing-gear maker purchased just last year — as a response to the coronavirus.
More than 60 per cent of the staff reductions have been completed, with the remaining to come upon closure of the Alta Precision facility "near the end of the fiscal year," the company said.
Heroux-Devtek spent $6 million on restructuring over the past three months, particularly on "employee-related charges" and dismantling and relocating machinery, it said.
Despite revenue that notched below expectations due to lacklustre commercial sales, the manufacturer's moves to "rein in costs and take necessary action in light of the (effect) COVID had on the aviation industry ... proved successful," Mona Nazir, an analyst with Laurentian Bank Securities, wrote in a research note.
Revenues for the three months ended June 30 decreased 10.5 per cent to $128.3 million, from $143.4 million in the first quarter of 2019.
Adjusted profits were cut in half, reaching $3.38 million or nine cents per share, compared with $6.96 million or 19 cents per share in the prior year.
Nonetheless, they beat analyst predictions of seven cents per share, according to financial markets data firm Refinitiv.
This report by The Canadian Press was first published Aug. 7, 2020.
Companies in this story: (TSX:HRX)
Christopher Reynolds, The Canadian Press