Spirit Aero books $101 million in losses, cuts 737 fuselage deliveries

By Abhijith Ganapavaram and Valerie Insinna

(Reuters) -Spirit AeroSystems on Wednesday announced $101 million in forward losses on key Boeing (NYSE:) and Airbus aircraft production efforts and projected higher-than-expected cash burn for 2023 as it slashed anticipated deliveries of 737 fuselages.

The aerospace supplier booked a $47.3 million charge on the Boeing 787 Dreamliner program and a $22.7 million loss on the Airbus A350 program during the third quarter due to higher supply chain and labor costs.

Spirit also increased its anticipated free cash burn to between $275 and $325 million for the year, compared with the $200 million to $250 million range.

It attributed that increase in cash consumption to lower expected 737 narrowbody fuselage deliveries to Boeing, which are now expected to be within 345 to 360 units, compared with its prior forecast of 370 to 390 units.

Despite the dent to some of the company’s annual targets, shares were up 2.8% in premarket trade as its announcements were consistent with analysts’ expectations.

Spirit booked unfavorable cumulative catch-up adjustments of $49.3 million on the Boeing 737 program and $10.6 million on the Airbus A320 due to higher factory costs and rework needed to fix a 737-related production error.

One of the industry’s largest suppliers, Spirit has been struggling to stabilize cash flows due to persistent inflationary pressures and a series of production snafus.

Last week, Boeing cut its own annual 737 delivery forecast from at least 400 aircraft to between 375 and 400 jets due to quality woes at Spirit.

Earlier in October, Boeing and Spirit reached a financial agreement which executives at both companies said will stabilize Spirit by increasing near-term revenues.

Spirit reported a third-quarter adjusted loss per share of $1.42, less than the average analysts’ expectation of a loss of $1.54 per share, according to LSEG data.

Revenue rose 13% to $1.43 billion, compared with estimates of $1.46 billion.

Spirit on Wednesday said third-quarter cash burn was $136 million, compared with a cash burn of $73 million a year ago.

Investors will want to know the status of ongoing financial negotiations with Airbus and get insight on 2024-25 cash flow projections during the earnings call, said Cowen analyst Cai Von Rumohr.