Spirit AeroSystems' second quarter net losses driven by delivery delays

Spirit AeroSystems - the American aerostructures manufacturer recently reacquired by Boeing - posted a net loss of $415 million in the second quarter of 2024, doubling from last year's second quarter net loss of $206 million. ""While we have made significant improvements in the quality of our product, our financial results were negatively impacted by delivery delays as we continue to optimise the product verification process,"" said Spirit AeroSystems executive vice president and chief financial officer Irene Esteves. Spirit and Boeing had established a joint product verification process in March 2024. The programme would ""ensure conformity"" of Spirit's fuselages prior to delivery to Boeing's final assembly site in Renton, Washington. It delivered 27 fuselages for the 737 aircraft during the quarter, which was lower than expectations. In addition, its production facilities cycled at a rate of 31 aircraft per month during the quarter, which was faster than the units accepted through the joint verification programme. This led to an increase of undelivered units in Wichita, Kansas. The company read in its report: ""This delay in deliveries contributed to higher levels of contract assets and inventory, which resulted in higher operational cash usage."" The units are considered delivered - and allow Spirit to collect on those units - once fully inspected and accepted by the customer. The second quarter also marked a ""dynamic and eventful period"" for Spirit, said its CEO and president Pat Shanahan. Boeing revealed on July 1 that it would acquire Spirit after it had spun off its main fuselage supplier nearly two decades ago. The deal is an all-stock transaction with an equity value of approximately $4.7bn. With the deal expected to close in mid-2025 and Spirit to subsequently go back into the Boeing fold, it said it will no longer provide guidance. In addition, the company did not hold a earnings call in conjunction with the release as a result of the deal. The company said its cash used in operations and free cash flow usage during the quarter was negatively impacted by the 737 delivery delays related to this joint production verification process. Cash used in operations during the quarter was $566 million, while its free cash flow usage totalled $597 million. Spirit's net revenues were up 9% in the quarter to $1.5bn when compared to the same period last year. This was driven by higher production activities on most of its commercial programmes as well as higher defence and space revenues, partially offset by lower production volume on the 737 programme. Commercial revenues were up 7.7% to $1.2bn, while defence and space revenues were up 18.4% to $222.4 million. As of the end of the quarter, its backlog was approximately $48bn, which includes work packages on all commercial platforms in the Airbus and Boeing backlog. The company reported an operating loss of $331 million, widening from its second quarter 2023 operating loss of $120 million. The company said this was ""primarily driven by the highly unfavourable changes in estimates during the current period"". Total change in estimates in the quarter included net forward losses of $214 million and unfavourable cumulative catch-up adjustments for previous period of $52 million. The 787 programme drove $173 million of forward losses due to schedule changes. The A220 programme recognised $25 million of forward losses, primarily resulting from production performance and supply chain cost growth. As of June 27, 2024, its cash totalled $206 million, while its debt totalled $4.1bn. The company also participated in the National Transportation Safety Board (NTSB) on August 6, 2024, regarding the Alaska Airlines Flight 1282 incident, where a door plug blew out shortly after takeoff on January 5, 2024.