Oct 26 (Reuters) – Boeing Co ( BA.N ) reported an unexpectedly deep third-quarter loss on Wednesday as cost overruns led to huge losses in its ailing defense business, underscoring the challenge the company faces in turning around its fortunes.
The Virginia-based planemaker is trying to emerge from overlapping crises — the pandemic and the grounding of its best-selling model after fatal crashes that left it in debt.
However, a run-up in the cost of Boeing’s defense contracts and continued supply-chain disruptions and regulatory hurdles have made it difficult to shore up its fortunes.
In the quarter through September, the company reported $2.8 billion in charges for its Air Force One and refueling tanker programs, among others.
The latest write-up comes a day after Reuters reported that Boeing had hired Steve Parker, a senior troubleshooter, to help turn around loss-cutting programs at its defense unit.
Rising cost pressures in the past few months have hampered fixed-price contracts for US aerospace and defense firms, prompting an industry body to ask the US Congress for inflation relief.
Because these contracts are fixed prices, Boeing needs to absorb the cost increase. Agency partners estimate that the company’s various fixed-price defense contracts have already resulted in $8.8 billion in fees.
“Each quarter, one expects the end of a program specific bad news, but then we get another installment — maybe it is? Maybe not,” analysts at Agency Partners said in a note.
Boeing shares fell 1.7 percent to $144.55 in morning trading.
The company has cut estimates for 737 MAX deliveries this year. It now expects to deliver 375 aircraft this year, down from its earlier target of “low 400s”.
Chief Executive Dave Calhoun said he is confident the planemaker will get an extension from the U.S. Congress on the key deadline to certify the MAX 7 and MAX 10.
The company said that while demand for commercial aircraft remains strong, supply chain disruptions continue to challenge the industry.
It pointed to delays in jet engine deliveries as the primary obstacle to stabilizing and increasing production rates for the 737 jets. It calls the supply chain a “key watch item” for production and delivery of the 787 jet in the near term.
Boeing expects supply-chain challenges to remain through 2023. To boost production, the company said it has added more than 10,000 employees this year and is investing in training and development to improve productivity.
It maintained its forecast for generating cash this year after reporting free cash flow of $2.9 billion in the September quarter, more than the $1.02 billion expected by analysts in a Refinitiv survey.
Adjusted loss per share widened to $6.18 in the third quarter from $0.60 a year earlier. Quarterly revenue rose 4% to $15.96 billion.
Demand in the global services business, which provides spare parts and services such as jet conversions, was a bright spot, with revenue rising 5% in the quarter to September.
Reporting by Abhijit Ganapavaram in Bengaluru and Rajesh Kumar Singh in Chicago; Edited by Arun Coyure, Kirsten Donovan and Nick Ziminski
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