As Covid-19 sends the commercial aerospace industry into a tailspin, Senior (SNR) is guiding that revenue for the six months to 30 June will fall by 30 per cent year-on-year alongside “significantly lower” margins. Chief executive David Squires has warned that “the impact will be with us for some time to come”.
The technology and components supplier was already pointing to a difficult year before the pandemic really started to bite – back in March it predicted that aerospace revenue in 2020 would decrease by 20 per cent. This came amid the halt in production of Boeing’s (US:BA) 737 Max jet due to safety issues and Senior’s decision not to renew certain contracts producing lower returns. But aerospace sales tumbled by 31 per cent in the first half, with a 40 per cent decline in the second quarter.
With airlines cutting capacity, retiring older aircraft and looking to defer new orders, plane and engine makers have curbed their production rates. This has had a knock-on impact throughout the supply chain, including for Senior. The group expects that lower production rates will continue into 2021.
However, Covid-19 disruption has not been isolated to civil aerospace. Senior’s ‘flexonics’ business – which make products for vehicle emissions and thermal management – has seen customers curb output, with North American truck production down more than 50 per cent in the first five months of the year. Flexonics sales dropped by 27 per cent in the first half and the market is not forecasted to improve across the remainder of 2020.
In response to the challenging environment, Senior is cutting 12 per cent of its workforce. It had already trimmed 5 per cent of jobs in the second half of last year as part of its restructuring programme. Alongside transferring more work to South East Asia, the group now aims to deliver £35m of savings this year – up from previous expectations of £23m – although it will cost the same amount to deliver these efficiencies. There will also be an associated cash outflow of up to £25m.
