Precision Castparts Feeling Impact of Boeing Strike

Precision Castparts Corp., which produces forgings and investment castings, particularly for aerospace manufacturers, reported increased second-quarter and year-on-year revenues and earnings recently, but warned investors that the near future may be less positive. Portland, OR-based PCP posted second-quarter 2009 net income of $269.3 million, compared with $235.4 million in the same period of 2007. However, chairman and CEO Mark Donegan said his organization is “feeling the impact of the Boeing strike, and the longer it lasts, the more orders will get pushed out. Boeing Co.’s assembly plants have been hindered by a strike since September 6, involving about 27,000 members of the International Assn. of Machinists and Aerospace Workers. Some analysts calculate the strike is costing Boeing as much as $100 million/day in lost revenue from major aircraft orders, but the effects are also slowing activity for Boeing suppliers. "Demand on our Special Metals aerospace operations had already begun to fall late in the second quarter,” stated Donegan, “and we are now seeing the impact on our third-quarter sales expectations across the balance of our aerospace businesses." Precision Castparts stated its Investment Cast Products division recorded “robust aerospace demand” during the last quarter, but that activity has been disrupted. PCP expects demand to resume when the strike ends, and to accelerate when Boeing 787 Dreamliner moves into full production. Investment Cast Products also noted growing demand for industrial gas turbine (IGT) components, “driven by solid demand in the global marketplace and increased customer penetration.” The company completed two plant expansion for its IGT product line, at the Deer Creek IGT operation in Portland and new plant in Painesville, OH. The latter plant, Renaissance Park IGT “is transitioning rapidly from qualification into initial production through the balance of the fiscal year, providing a firm foundation for accelerated growth,” according to PCP. Sales of forgings were also impacted by the Boeing strike. The group said its Forged Products operations earned $781.1 million in the past quarter, down from $813.0 million in 2007. Higher metal prices impacted earnings on finished forgings, particularly for supply to internal customers, as did lower prices for products sold externally. PCP said a planned maintenance project to repair isothermal forge damage, and Hurricane Ike negatively impact the segment's operating income by approximately $22.0 million. However, Precision Castparts forecasts that its Forged Products group sales will continue to benefit from rising sales of seamless pipes sales, and from aerospace sales once the strike is over. Again, it predicted that the ramp-up of the 787 would enhance the prospects for this segment.