Italys largest aerospace and defence group, Finmeccanica SpA, set revenue targets short of analyst forecasts and struck a cautious note on its prospects amid the crisis, sending its shares down 5 percent. The disappointing outlook released on Wednesday overshadowed buoyant 2008 results issued after the market close on Tuesday, which met forecasts with a 19 percent rise in profit and included a hike in the dividend payout.
The company, which helps build the Eurofighter jet, forecast 2009 revenues of 17.1-17.7 billion euros ($21.7-$22.5 billion) and 17.4-18.6 billion for 2010, below Reuters Estimates average forecasts of 18.16 billion and 19.06 billion respectively. Finmeccanica said it decided not to set its sights higher since it only wanted to pursue business with guaranteed profit levels and which would not trigger charges in future, finance director Alessandro Pansa told an analyst presentation.
"We have decided to avoid revenues which are not giving a certain level of profitability," Pansa told analysts in London. "The only way that a company like Finmeccanica (can) respond properly to the present crisis is to concentrate on efficiency, profitability and streamlining, to a certain extent." The company, which plans to focus on profit growth and debt reduction over the next three years, reiterated the financial crisis should not trigger a revision of its growth targets but a focus on financial discipline was required to meet them.
Finmeccanica shares slid as much as 7 percent earlier on Wednesday after solid 2008 results failed to cheer investors, who fretted about its prospects amid a weakening economy and planned defence spending cuts in its key markets. The shares, which have halved in value over the past year, had fallen 4.9 percent to 9.335 euros by 1213 GMT, having dropped as low as 9.11 euros earlier in the session.
However, Finmeccanica, which makes helicopters, satellites and electronic warfare systems, said it expected defence budgets to remain substantially stable in Italy, the United Kingdom and the United States or 60 percent of said major revamp or upgrade programmes could mortfall from any delayed or cancelled US contracts.
Finmeccanica, whose shares were hit last month by fears Washington could scrap a high-profile contract to build the US presidential helicopter, said it had already accounted for potential risks related to the contract in its forecasts.
The company also promised its dividend payouts would rise in line with profits and that it would keep its debt ratios within limits needed to maintain its credit ratings. Analysts, however, remained unimpressed. UBS analysts said Finmeccanicas forecast of free operating cash flow similar to 2008 levels was disappointing, given some of its major development programs were starting to mature. It also said the revenue and profit outlook was disappointing. "We believe the shortfall relative to expectations can only in part be explained by currency," UBS wrote in a research note.
"Finmeccanicas outlook statement cautions on the impact of the macroeconomy on the business and the potential direction of government expenditures." Even the tempered outlook may end up being too ambitious in light of defence spending cuts and the fast-deteriorating economic climate, warned Cassa Lombarda analyst Serge Escude. Finmeccanicas results came after Airbus parent EADS, the worlds No 2 aerospace company, on Tuesday reported 2008 operating profit that beat expectations but warned it faced lower profits and orders this year.