Boeing reported a better-than-expected quarter on Wednesday but continued to burn through money to stabilize production after a near-catastrophic door failure on a 737 Max earlier this 12 months.
Boeing burned through $3.9 billion in the primary quarter, beating an earlier company forecast and Wall Street analysts’ expectations that it will burn as much as $4.5 billion in money for the three-month period.
“In the short term, yes, we are in a difficult time,” CEO Dave Calhoun, who announced in March that he would step down at the tip of the 12 months, said in a note to employees on Wednesday. “Reduced deliveries may be difficult for our customers and our finances. But safety and quality must and will come first. We are absolutely committed to doing everything we can to ensure that our regulators, customers, employees and the flying public have 100 percent confidence in Boeing.”
Hampered in ramping up production, particularly of its best-selling 737 Max planes, Boeing has as an alternative cut output. After the Alaska Airlines Max 9’s door plug blew on Jan. 5, the Federal Aviation Administration blocked Boeing from increasing production. The FAA also said it found quite a few noncompliance issues in Boeing’s supply chain and on Feb. 28 gave Boeing 90 days to develop a plan to enhance quality control.
Calhoun reiterated Wednesday that the corporate’s 737 Max production has fallen below 38 Max jets monthly, and the corporate said the speed will remain at that level through no less than the primary half of the 12 months. Deliveries fell sharply this quarter. Earlier this week, Boeing told employees it expects slower production increases and deliveries of its 787 Dreamliners because of parts shortages.
Boeing’s key industrial aircraft revenue fell 31% year-over-year to $4.65 billion within the quarter, with negative margins widening to 24.6% from 9.2%, including the impact of Boeing’s compensation -Customers of $443 million because of the January 5 accident and temporary grounding of the aircraft.
The company will proceed to have a “significant cash burn” within the second quarter, CFO Brian West said in an earnings call on Wednesday.
Ratings agency Moody’s downgraded Boeing on Wednesday, citing the corporate’s lack of liquidity, and said Boeing would want to tackle more debt to repay greater than $4 billion in debt due in 2025.
“We are using this time, as difficult as it may be, to deliberately slow the system, stabilize the supply chain, strengthen our factory operations and enable Boeing to deliver over the long term with the predictability and quality our customers demand Calhoun said. “As these efforts take hold, we are beginning to see signs of more predictable, stable and efficient cycle times at our 737 factory and expect this to continue to slowly improve.”
Boeing lost $355 million, or 56 cents per share, in the primary quarter, compared with a lack of $425 million, or 69 cents per share, a 12 months earlier. Excluding one-time items, including pension costs, the corporate lost $388 million, or $1.13 per share.
Revenue fell 8% to $16.57 million, barely above analysts’ estimates.
Here’s what the corporate does reported in comparison with what Wall Street analysts surveyed by LSEG expected:
- Loss per share: $1.13 adjusted, in comparison with the estimated adjusted lack of $1.76
- Revenue: $16.57 billion versus an estimated $16.23 billion
Calhoun on Wednesday maintained the corporate’s goal of reaching $10 billion in annual free money flow in 2025-2026, but said achieving that goal would likely be delayed by about six months.
“I believe it, I just believe it,” Calhoun said of the $10 billion goal.
Boeing has sought to scale back so-called “travel work,” where manufacturing steps are out of order because of defects. Calhoun told CNBC in an interview on Wednesday that the corporate’s hull maker Spirit AeroSystems will “only ship a compliant hull.”
Boeing is in talks to purchase back Spirit, which it spun off nearly 20 years ago. The Wichita, Kansas-based company also supplies Airbus, and discussions about learn how to appeal to non-Boeing customers are key to an acquisition deal.
Calhoun said it was “more than likely” the businesses would reach an agreement within the second quarter.
“As we work with its other clients, Spirit is taking steps to ensure that all of those relationships are what they need to be,” he told CNBC. “We will be patient and let them do their work with their respective clients and we will get a deal done.”
—CNBC’s Phil Lebeau contributed to this report.
