Post by andypspotter on Sept 13, 2016 22:46:16 GMT
As is often the case, this year’s ranking of the world’s largest aerospace manufacturers by revenue has a familiar feel, with the top eight companies staying in the same position as last year and only small movements throughout most of the list. The industry is dominated by big beasts and – unlike sectors such as internet technology, retailing and even aviation – the government-influenced, long-term-development, high-entry-costs nature of global aerospace manufacturing makes it very difficult for disruptive market entrants to break that grip. With the odd exception of visionaries such as SpaceX’s Elon Musk, there are few Facebooks or Ubers in aerospace.
That said, there is movement in the latest league table, with seven new entrants. The majority of these have not slipped in because of rapid revenue growth but because we felt they had been left out of previous rankings – every year, as well as analysing the financial performance of the industry’s biggest companies, we have to reassess our inclusion criteria, especially when it comes to diversified corporations that have been steadily building their aerospace activities. Occasionally too, a company that has previously kept its profile low on the international stage, makes its presence known.
The new faces in this year’s ranking are Barnes Aerospace, a Connecticut-headquartered industrial products and aerospace components manufacturer, which appears at position 91; ITT, a diversified group with substantial interests in aerospace, placed at 94; Korean Air’s aerospace business (a separate company to Korea Aerospace Industries), in at 73; the USA’s Nordam, which produces a range of products from engine cowlings to transparencies, sitting at 74; the avionics arm of Japanese electronics giant Panasonic, at 40; aircraft seating specialist Recaro, at 89; and another Japanese conglomerate with a footprint in aerospace, 96th-ranked ShinMaywa.
They replace seven companies included in last year’s listing. Four of these have dropped below the threshold for the Top 100. They are UK firm Doncasters (98 in 2015), Italy’s Elettronica (previously 97), thermal imaging technology firm FLIR Systems (100 last time) and unmanned air systems specialist Griffon (90 in 2015). Three other companies have also disappeared as a result of industry consolidation: we have amalgamated Irkut – developer of the MC-21 airliner – with Russia’s national aerospace holding group, United Aircraft; Fokker of the Netherlands was acquired by the UK’s fast-growing GKN; finally, Harris bought Exelis, helping push the former up the ranking from 33 to 30.
Beyond these, possibly the most high-profile acquisition was Lockheed Martin’s swoop for Sikorsky from United Technologies (UTC), custodian of brands such as Pratt & Whitney and the former Goodrich and Hamilton Sundstrand, now grouped under UTAS. That came too late in 2015 to substantially influence UTC’s revenues. Apart from that, it was a relatively quiet year on the mergers and acquisitions front, although activity continues. It emerged this year that UTC and Honeywell – a diversified corporation beyond its aerospace activities – had been talking during 2015 about joining forces. These discussions were abandoned earlier this year.
Two major Top 100 companies have also introduced major rebranding exercises, although in both instances after the 2015 financial year under scrutiny in this survey. Finmeccanica became Leonardo in April, although it will keep the double-barrelled moniker during a transition period until December; we have alphabetically listed the Italian champion under L for Leonardo. All its subsidiaries will eventually carry the Leonardo name. A decade after christening itself Safran after merging with Sagem, the former Snecma is undergoing a similar move, unifying legacy businesses such as Messier-Bugatti-Dowty and Turbomeca under a single Safran brand.
In terms of the Top 100’s financial performance, this has been somewhat influenced by the greater-than-usual movement in exchange rates between the dollar and many major currencies during the year. For instance, the average euro to dollar exchange rate shifted from €1 = $1.329 to €1 = $1.115 from 2014 to 2015. As we convert all figures into dollars – for the sake of consistency and because the greenback is the recognised world trading currency – this has caused European companies to move down the rankings relative to their US counterparts. The dollar has also strengthened against other currencies to the advantage of US companies’ revenue figures.
Our analysis shows that overall revenues for the Top 100 have dropped by 2.4%, against a world GDP growth figure of 2.4%, whereas operating profits have slumped by 18.5%. While the picture is mixed, some of this can be attributed to the rise in the dollar, although not all European companies have suffered. Airbus, Safran, BAE Systems and Leonardo Finmeccanica are among those who have seen their revenues rise in dollar terms. The picture varies between the biggest and smallest companies too. While the top 20 businesses have seen revenues fall by just over 1%, sales for the bottom 20 dropped by a little more than 7%.
This pattern is repeated when it comes to operating profits. Overall, the Top 100 companies experienced a decline of 18.5%. However, the biggest 10 kept their slide in profitability to less than half of that, 8.3%. Operating margins fell from 10% in the previous year’s survey to 8.4% in 2015, although investors would have to judge whether that represents a reasonable return. Almost two-thirds of the Top 100 – 64 companies – are in the “billionaire club”, posting total revenue in excess of $1 billion in 2015. In 2014, the 68th placed company – Turkish Aerospace – nudged over the billion-dollar line.
It is difficult to read too many trends into the ranking of those companies enjoying the biggest increase in turnover, although many of them are involved in the commercial airliner supply chain: number one and three in the list – Constellium and Alcoa – are both interestingly involved in the production of aluminium, one of the key raw materials as the industry ramps up output. Others such as Figeac Aero, ShinMaywa, Fuji Heavy Industries, MTU, Magellan and GKN are also benefiting from demand from the likes of Airbus and Boeing. Although Dassault has been hit by a decline in demand for Falcon business jets, a lag with shipments and good news on Rafale helped boost 2015 turnover.
Overall, aerospace remains in great shape. Driving its strong performance are record airliner order books, with production hikes to meet demand feeding through to the supply chain, and just a few warning signs emerging that there may need to be some correction to ambitious ramp-up plans. On the downside, despite continuing threats from a resurgent Russia and Islamist terrorism, Western defence budgets remain depressed, while previously buoyant sectors such as large-cabin business jets and offshore helicopters began to take a hammering in 2015. As ever, companies with an exposure across all markets are in the best position to balance and de-risk their activities.
Full report at: www.flightglobal.com/asset/13060
That said, there is movement in the latest league table, with seven new entrants. The majority of these have not slipped in because of rapid revenue growth but because we felt they had been left out of previous rankings – every year, as well as analysing the financial performance of the industry’s biggest companies, we have to reassess our inclusion criteria, especially when it comes to diversified corporations that have been steadily building their aerospace activities. Occasionally too, a company that has previously kept its profile low on the international stage, makes its presence known.
The new faces in this year’s ranking are Barnes Aerospace, a Connecticut-headquartered industrial products and aerospace components manufacturer, which appears at position 91; ITT, a diversified group with substantial interests in aerospace, placed at 94; Korean Air’s aerospace business (a separate company to Korea Aerospace Industries), in at 73; the USA’s Nordam, which produces a range of products from engine cowlings to transparencies, sitting at 74; the avionics arm of Japanese electronics giant Panasonic, at 40; aircraft seating specialist Recaro, at 89; and another Japanese conglomerate with a footprint in aerospace, 96th-ranked ShinMaywa.
They replace seven companies included in last year’s listing. Four of these have dropped below the threshold for the Top 100. They are UK firm Doncasters (98 in 2015), Italy’s Elettronica (previously 97), thermal imaging technology firm FLIR Systems (100 last time) and unmanned air systems specialist Griffon (90 in 2015). Three other companies have also disappeared as a result of industry consolidation: we have amalgamated Irkut – developer of the MC-21 airliner – with Russia’s national aerospace holding group, United Aircraft; Fokker of the Netherlands was acquired by the UK’s fast-growing GKN; finally, Harris bought Exelis, helping push the former up the ranking from 33 to 30.
Beyond these, possibly the most high-profile acquisition was Lockheed Martin’s swoop for Sikorsky from United Technologies (UTC), custodian of brands such as Pratt & Whitney and the former Goodrich and Hamilton Sundstrand, now grouped under UTAS. That came too late in 2015 to substantially influence UTC’s revenues. Apart from that, it was a relatively quiet year on the mergers and acquisitions front, although activity continues. It emerged this year that UTC and Honeywell – a diversified corporation beyond its aerospace activities – had been talking during 2015 about joining forces. These discussions were abandoned earlier this year.
Two major Top 100 companies have also introduced major rebranding exercises, although in both instances after the 2015 financial year under scrutiny in this survey. Finmeccanica became Leonardo in April, although it will keep the double-barrelled moniker during a transition period until December; we have alphabetically listed the Italian champion under L for Leonardo. All its subsidiaries will eventually carry the Leonardo name. A decade after christening itself Safran after merging with Sagem, the former Snecma is undergoing a similar move, unifying legacy businesses such as Messier-Bugatti-Dowty and Turbomeca under a single Safran brand.
In terms of the Top 100’s financial performance, this has been somewhat influenced by the greater-than-usual movement in exchange rates between the dollar and many major currencies during the year. For instance, the average euro to dollar exchange rate shifted from €1 = $1.329 to €1 = $1.115 from 2014 to 2015. As we convert all figures into dollars – for the sake of consistency and because the greenback is the recognised world trading currency – this has caused European companies to move down the rankings relative to their US counterparts. The dollar has also strengthened against other currencies to the advantage of US companies’ revenue figures.
Our analysis shows that overall revenues for the Top 100 have dropped by 2.4%, against a world GDP growth figure of 2.4%, whereas operating profits have slumped by 18.5%. While the picture is mixed, some of this can be attributed to the rise in the dollar, although not all European companies have suffered. Airbus, Safran, BAE Systems and Leonardo Finmeccanica are among those who have seen their revenues rise in dollar terms. The picture varies between the biggest and smallest companies too. While the top 20 businesses have seen revenues fall by just over 1%, sales for the bottom 20 dropped by a little more than 7%.
This pattern is repeated when it comes to operating profits. Overall, the Top 100 companies experienced a decline of 18.5%. However, the biggest 10 kept their slide in profitability to less than half of that, 8.3%. Operating margins fell from 10% in the previous year’s survey to 8.4% in 2015, although investors would have to judge whether that represents a reasonable return. Almost two-thirds of the Top 100 – 64 companies – are in the “billionaire club”, posting total revenue in excess of $1 billion in 2015. In 2014, the 68th placed company – Turkish Aerospace – nudged over the billion-dollar line.
It is difficult to read too many trends into the ranking of those companies enjoying the biggest increase in turnover, although many of them are involved in the commercial airliner supply chain: number one and three in the list – Constellium and Alcoa – are both interestingly involved in the production of aluminium, one of the key raw materials as the industry ramps up output. Others such as Figeac Aero, ShinMaywa, Fuji Heavy Industries, MTU, Magellan and GKN are also benefiting from demand from the likes of Airbus and Boeing. Although Dassault has been hit by a decline in demand for Falcon business jets, a lag with shipments and good news on Rafale helped boost 2015 turnover.
Overall, aerospace remains in great shape. Driving its strong performance are record airliner order books, with production hikes to meet demand feeding through to the supply chain, and just a few warning signs emerging that there may need to be some correction to ambitious ramp-up plans. On the downside, despite continuing threats from a resurgent Russia and Islamist terrorism, Western defence budgets remain depressed, while previously buoyant sectors such as large-cabin business jets and offshore helicopters began to take a hammering in 2015. As ever, companies with an exposure across all markets are in the best position to balance and de-risk their activities.
Full report at: www.flightglobal.com/asset/13060