Héroux-Devtek reports year-end, strong defence backlog
Héroux-Devtek Inc. of Longueuil, Quebec, on May 21 reported financial results for its fourth quarter and fiscal year ended March 31, 2020. As the world’s third-largest landing gear manufacturer, facing the new-normal challenges of COVID-19 and the business of commercial aviation, the company reported a funding backlog of $810 million with two thirds of that amount comprising defence orders.
“We believe we are in good position to weather the storm and eventually emerge as a well-positioned organization,” said Martin Brassard, president and CEO of Héroux-Devtek, describing the unprecedented impact of COVID-19, as well as capacity and financial actions taken by the Quebec company to shelter its production, which includes a range of fracture-critical aerospace products in addition to its landing-gear position. “First, we can count on a strong backlog of $810 million, two thirds of which is comprised of orders for the defence sector.
“Second, Héroux-Devtek is in a solid financial position, with $193 million of available liquidity at year-end and no significant capital repayments due on our debt until the end of 2024,” continued Brassard. “Last but not least, we can count on a highly dedicated team of employees in Canada, Europe and the USA, who have already demonstrated their impressive resilience under these challenging circumstances.”
Fourth quarter sales of $166.8 million represented an increase of 5.6 per cent relative to Héroux-Devtek’s previous year’s quarter at $157.9 million. Year-end consolidated sales reached approximately $613 million, up 21.1 per cent from its $483.9 million sales mark of one year ago.
Héroux-Devtek, however, reported an earnings loss of $72.1 million in the fourth quarter, primarily because of a $79.7 million non-cash goodwill impairment charge, which created a fourth-quarter operating loss of $64.4 million. This charge was accounted for in the fourth quarter based on what the company describes as a significant reduction in expected demand for commercial aerospace products caused by the ongoing COVID-19 pandemic.
Commercial sales in Héroux-Devtek’s fourth quarter decreased 7.8 per cent from $78 million one year ago to $72 million in the most recent quarter, while defence sales were up 18.7 per cent, from $79.9 million to $94.8 million. Primarily as a result of the fourth quarter impact on operating income, Héroux-Devtek reported a net income loss of approximately $50.7 million for its year end relative to a positive earnings result of $26.2 million last year.
For its 2020 fiscal year end, Héroux-Devtek’s commercial sales grew 20.1 per cent from $236.3 million to $283.7 million year over year, while defence sales were up 33 per cent in fiscal 2020, from $247.6 million to $329.3 million, driven mainly by acquisitions and a 12.2 per cent organic growth. Adjusted EBITDA, which excludes non-recurring items, stood at $96.2 million, or 15.7 per cent of sales, compared with $74.2 million, or 15.3 per cent of sales last year.
Due to the uncertainty brought by the COVID-19 pandemic, Héroux-Devtek is not providing any financial guidance for Fiscal 2021 and back in early April announced it was also withdrawing its fiscal 2022 sales guidance.