Heroux-Devtek deepens Boeing ties with contract to supply components for 787
MONTREAL - Aerospace manufacturer Heroux-Devtek is deepening its relationship with Boeing after being awarded a multi-year contract to produce components for its 787 Dreamliner.
The Quebec-based maker of landing gear for commercial and military aircraft will fabricate the torque tubes used in the wing flaps at its plant in Laval, north of Montreal.
"This important multi-year contract further strengthens our business relationship with Boeing and provides Heroux-Devtek with additional content on a growing program," said CEO Gilles Labbe.
Production of the Boeing wide-body aircraft will increase from 10 airplanes per month to 12 in 2016, and 14 by the end of the decade. The order backlog was for 869 planes as of July 31.
Heroux-Devtek (TSX:HRX) manufactures torque tubes for the Boeing 777 and 737.
"This new contract for the 787 reaffirms our status as an important supplier of quality products and services to original equipment manufacturers," he added, after releasing results from the first quarter of its fiscal year.
The company missed expectations even though its profit increased 25 per cent to $3.5 million, thanks to the acquisition of British landing-gear maker APPH Ltd.
That translated into 11 cents per share for the three months ended June 30, up from nine cents or $2.8 million last year.
Sales increased 37.2 per cent to $86.4 million, which included contributions from the APPH purchase made in February.
The new 787 contract win comes several months after it was selected to be exclusive supplier of complete landing gear systems for the Boeing 777 and B-777-X starting in 2017. Work on that contract will be completed at plants on the south shore of Montreal, Ontario and Ohio, Labbe said following the company's annual meeting.
He said there won't be massive hiring of new employees because it wants to automate the manufacturing process.
About 160 propel work at its plant in Laval and another 360 in Longueuil, excluding those in the head office.
Heroux-Devtek will invest $90 million over the next two years.
"We have an idea about the percentage (of work) that will be given to each plant, but I don't want to divulge that right now."
Benoit Poirier of Desjardins Capital Markets said the contract win offset slightly weaker results.
"We view this announcement positively, as it reinforces our belief that Heroux-Devtek is becoming a major player in the landing gear market and shows the company's ability to be competitive with Goodrich and Messier-Dowty," he wrote in a report.
Adjusted net income was $3.8 million, or 12 cents per share. Heroux-Devtek was expected to earn 14 cents per share in adjusted profits on $84 million of revenues, according to analysts polled by Thomson Reuters.
Sales in the commercial aerospace market increased 53.4 per cent to $43.3 million, mainly due to commercial sales of$ 10.2 million generated by APPH.
Military aerospace sales reached $43.1 million, up 24 per cent compared to the previous year, helped by sales at APPH of $14 million.
Heroux-Devtek specializes in the design, development, manufacture and repair and overhaul of related systems and components of landing gear for the aerospace market.
On the Toronto Stock Exchange, its shares closed down four cents at $10.70 in Thursday trading.
â€” With files from Julien Arsenault
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