May 6, 2020 / 5:36 PM / 24 days ago

UPDATE 1-Spirit AeroSystems says coronavirus worsened its cash flow outlook

(Adds details on cash flow, shares, analyst’s comment)

By Ankit Ajmera

May 6 (Reuters) - Aircraft parts maker Spirit AeroSystems Holdings Inc said on Wednesday that its cash flow outlook for the year had worsened as top customers Boeing Co and Airbus SE cut production due to the COVID-19 pandemic.

Spirit, which forecast negative cash flow in February as a result of the 737 MAX aircraft grounding, said the coronavirus crisis had compounded its problems and it was looking at breaking even on cash flow in 2021, with a slower recovery going forward.

Shares of Spirit fell as much as 6.5% to $17.57.

The company said it expects 2020 free cash flow in the range of negative $600 million and $700 million, which is widely below analysts’ average expectation of negative $270 million, according to IBES data from Refinitiv.

“Spirit is in a world of pain, and it looks unlikely to end soon. It is arguably one of the most distressed aerospace names that we cover, and we would not be investing in the stock here,” said Robert Stallard, aerospace analyst at Vertical Research Partners.

Boeing, which accounts for nearly 80% of Spirit’s revenue, and Airbus have cut production of their planes after the pandemic triggered aviation’s worst industrial crisis and drastically reduced deliveries to cash-starved airlines.

Spirit said it will book additional losses of $70 million to $90 million in the second quarter related to a further reduction in 787 Dreamliner production by Boeing.

Spirit recorded a loss of about $34 million in the fourth quarter on Boeing’s move to lower the 787 rate to 10 jets per month by 2021 from 14 currently. Last month, Boeing said it was revising the rate again to seven 787s a month by 2022.

Spirit said it will also record a loss of $15 million to $20 million in the current quarter related to the Airbus A350 aircraft.

On Tuesday, Spirit said it now expects to deliver only 125 737 MAX shipsets - a complete set of parts for each aircraft - to Boeing in 2020, down from 216 it had planned earlier in the year, hurting its revenue and cash flow.

Spirit’s revenue plunged 45% to $1.08 billion in the first quarter ended April 2. The company reported a loss of $163 million in the quarter, compared with a profit of $163 million a year earlier.

The company has already announced various cost-cutting measure to save cash including, slashing its dividend to a penny a share, reducing thousands of workers and pay cuts for all its U.S.-based executives. (Reporting by Rachit Vats, Sanjana Shivdas and Ankit Ajmera in Bengaluru; Editing by Krishna Chandra Eluri and Shailesh Kuber)

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