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Spirit AeroSystems posts second-quarter loss

© Spirit AeroSystems

Spirit AeroSystems‘ (Spirit) revenue in the second quarter of 2023 was US$1.4 billion, up 8% from the same period in 2022. This increase was primarily due to higher production on the 737 and 787 programmes and increased Defence and Space revenue, partially offset by lower revenue on the A220 programme.  

Overall deliveries increased to 342 shipsets during the second quarter of 2023 compared to 318 shipsets in the same period of 2022. This includes Boeing 737 deliveries of 74 shipsets compared to 71 shipsets in the same period of the prior year. Spirit's backlog at the end of the second quarter of 2023 was approximately US$40.5 billion, which includes work packages on all commercial platforms in the Airbus and Boeing backlog.  

Operating loss for the second quarter of 2023 was US$120.4 million, compared to operating loss of US$104.7 million in the same period of 2022. The change in operating loss was primarily driven by higher changes in estimates as well as contra revenue recorded for a potential customer claim, partially offset by the absence of losses related to Russia sanctions recognized during the second quarter of 2022 and increased aftermarket segment earnings.

Changes in estimates in the second quarter of 2023 included net forward loss charges of US$104.7 million and unfavourable cumulative catch-up adjustments for periods prior to the second quarter of US$21.6 million. The forward losses related primarily to the Boeing 787, and Airbus A220 programmes. The forward loss on the Boeing 787 programme of US$37.5 million was driven by the impacts of the new IAM union contract as well as increased supply chain and other costs. The Airbus programme forward loss of US$27.5 million was primarily due to increased costs related to production rate recovery efforts, including freight, as well as unfavourable foreign currency movements. The Airbus A220 programme forward loss of US$27.4 million was driven by higher estimates of supply chain costs and unfavourable foreign currency movement. The unfavourable cumulative catch-up adjustments related primarily to the Boeing 737 programme, reflecting increased labour costs resulting from the IAM union negotiations as well as higher supply chain costs.

Additionally, strike disruption charges of US$7.3 million were recorded to other operating expense on the Consolidated Statements of Operations. Excess capacity costs during the second quarter of 2023 were US$53.2 million. In comparison, during the second quarter of 2022, Spirit recognized US$63.7 million of net forward loss charges, US$8.0 million of unfavourable cumulative catch-up adjustments and excess capacity costs of US$44.9 million. Additionally, in second quarter of 2022, in relation to the sanctioned Russian business activities, Spirit recorded net losses of US$28.1 million.

Spirit estimates that Boeing has completed approximately half of its required rework on the 737 vertical fin attach fittings issue. The Company has recorded US$23.0 million of contra revenue in the second quarter of 2023 to account for a potential claim from Boeing for repair work to date at their facility. This estimate represents what Spirit believes to be the low end of the range of potential liability and the company cannot reasonably estimate the total potential claim it may receive from Boeing to complete the required repairs.

Cash used in operations in the second quarter of 2023 was US$183 million, compared to cash used in operations of US$62 million in the same quarter of 2022. Cash used in operations during the second quarter of 2023 reflects the negative impacts to working capital resulting from the rework and disruption related to the vertical fin attach fittings issue, the work stoppage caused by the IAM strike, and the preparation for increased production on the Boeing 737 programme. Additionally, the second- quarter 2023 cash used in operations included customer advances of US$50 million, as well as an excise tax payment of US$36 million related to the termination of the Pension Value Plan A (PVP A).

Free cash flow in the second quarter of 2023 was a usage of US$211 million, as compared to a usage of US$79 million in the same period of 2022. (£1.00 = US$1.27 at time of publication).

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