Zodiac slides after profit warning on seat delays

By Reuters

Mar 20, 2015 10:23 AM EDT

Zodiac Aerospace suffered its worst share price drop in six years on Friday after issuing a profit warning due to delays in aircraft seat production that have prompted intervention by leading planemakers.

Shares in the Paris-based company fell as much as 12.8 percent, their biggest percentage drop since March 2009, unwinding a recent currency-driven rally and notching up 5 times the normal daily volume in less than two hours.

At mid-morning, the shares were down 8.6 percent at 30.3 euros.

Zodiac said on Thursday first-half current operating income would be "significantly" impacted by the delays.

It said it aimed to erase a 10-day average production backlog by the end of its September-August financial year.

French brokerage Natixis predicted the cost would be 150 million euros for the year and told investors it was prudent to assume that half the delay would be recovered by end-August.

"Not the least important question concerns the impact on the reputation of the group, which remains difficult to evaluate for the moment," it said in a note.

Several leading banks nonetheless said Zodiac had a promising medium-term business and would continue to benefit from the recent weakening of the euro against the dollar.

Confirming details first reported by Reuters, the company said Airbus and Boeing staff were in its factories to help with the turnaround and that for now, they were not recommending its seats to airlines.

A senior Boeing executive had told Reuters that Zodiac had "over-committed" and failed to integrate designs with requirements.

A senior Airbus official told Reuters this week it was sending in teams to help Zodiac "transform and recover".

Zodiac Chief Executive Olivier Zarrouati expressed confidence the situation would be brought under control after recent management changes and the creation of new processes.

Reuters reported on Wednesday that at least one of the top two planemakers had discussed removing Zodiac from its seats catalogue.

That would not block sales but would mean any new contracts with airlines had to be approved one by one, taking more time.

Zodiac said it had itself taken a decision to slow its commercial activities to concentrate on stabilising production.

© 2024 VCPOST, All rights reserved. Do not reproduce without permission.

Join the Conversation

Real Time Analytics