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Héroux-Devtek pinched by weaker U.S. military spending

A worker at the Héroux-Devtek facility in Montreal.

Nigel Horsley/Héroux-Devtek

Héroux-Devtek Inc. continues to feel the impact from a slowdown in U.S. military spending and repair activity.

The Longueuil, Que.-based maker of landing gear for commercial and military aircraft said on Friday it posted third-quarter net profit from continuing operations of $2.6-million or 8 cents per diluted share, compared with $3.2-million or 10 cents in the year-earlier period.

Excluding acquisition-related costs, earnings per share in the third quarter were 12 cents, compared with 10 cents.

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Sales were flat at $61.4-million, compared with $61.7-million a year earlier.

While sales to the commercial market increased 3.2 per cent to $28.5-million in the quarter, sales to the military sector declined 3.4 per cent to $33-million on reduced repair and overhaul activity, lower spare parts requirements – mostly on the B-2 and F-15 programs – and reduced electronic enclosure and cabinet sales at the Magtron division.

The lower military sales reflect a weak U.S. market due to reduced defence budget funding and sequestration measures, the company said.

However, there was some positive offset from new business with Boeing Co. on the CH-47 Chinook helicopter program, said the company.

"Héroux-Devtek generated a higher operating profitability during the third quarter as a result of a more favourable product mix compared with last year," said president and chief executive officer Gilles Labbé.

"As witnessed since the beginning of the current fiscal year, the strength of the large commercial aircraft market continues to be the main revenue driver, while the military aerospace market remains affected by U.S. budgetary constraints."

The company cautioned that the military market is expected to "remain challenging and the situation could affect the Corporation beyond the current fiscal year, despite having a diversified military portfolio, balanced between new component manufacturing and aftermarket products and services, that should lessen this impact."

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Héroux-Devtek announced on Monday the $124-million (U.S.) acquisition of British-based APPH Ltd. and U.S.-based APPH Wichita Inc., subsdiaries of BBA Aviation PLC. The companies make landing gear and hydraulic systems and assemblies.

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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