Italy’s Leonardo posts lower Q1 profits, but orders rise

By Alvise Armellini

ROME (Reuters) – Italy’s state-controlled defence and aerospace group Leonardo on Wednesday posted lower first-quarter profits and earnings, but reported a jump in orders and backlog, and confirmed financial targets for 2023.

CEO Alessandro Profumo also said Germany’s Hensoldt, in which Leonardo has a 25% stake, would not be buying his company’s defence electronics business, as was suggested last month by Hensoldt CEO Thomas Mueller.

Profumo said there might be a “combination” in the sector but this would be “conceptually different from an acquisition,” and he called Mueller’s comments “an unfortunate misunderstanding”.

Leonardo’s Q1 profit stood at 40 million euros ($44.2 million) compared to 72 million euros 12 months earlier, while earnings before interest, taxes and amortisation (EBITA) fell year-on-year by 20.5% to 105 million euros.

Revenues were broadly flat at around 3 billion euros, while new orders rose by 28.5% year-on-year to almost 4.9 billion euros “in particular thanks to the excellent performance of helicopters,” the company said in a statement.

Order backlog rose in the same period by 7.9% to 39.1 billion euros, equal to more than 2.5 years of production, while net debt fell to 3.7 billion euros as of end-March, down by 1.1 billion year-on-year, thanks to stronger cash generation.

Nevertheless, results were below analysts’ expectations.

In a company-provided consensus forecast, they had expected a quarterly net profit of 48 million euros and EBITA of 120 million euros, but revenues were correctly predicted at around the 3-billion-euro mark.

Profumo said the company remained “solid” and well positioned to capture growth opportunities at a time of rising European defence spending due to the Ukraine war.

Leonardo confirmed its 2023 targets including new orders at around 17 billion euros, revenues in the 15 billion-15.6 billion euro range, EBITA at 1.26-1.31 billion euros and group net debt of about 2.6 billion euros.

Profumo used the call with analysts to bid farewell after six years as CEO. He is expected to be replaced by Italian government nominee Roberto Cingolani, a former energy minister, at a shareholders’ meeting on May 9.

The outgoing boss also hailed Leonardo’s ratings upgrade from Moody’s (NYSE:), one notch to investment grade, from Ba1 to Baa3, due to credible debt reduction, stable dividends policy and solid growth prospects for the defence industry as a whole.($1 = 0.9052 euros)