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Héroux-Devtek in the 2nd quarter | New contract with Embraer and results that exceed expectations



Héroux-Devtek expands its business relationship with Embraer thanks to a new contract in the cargo sector, a timely agreement that offsets setbacks observed in the defense sector. The specialist in landing gear and aeronautical components also exceeded expectations in the second quarter, which pushed up its share price.

The Longueuil-based company will be responsible for the design, development and manufacture of the main deck actuation system — the area that receives cargo — for Embraer’s E190F and E195F freighter conversion program.

This contract also provides for the delivery of spare parts.

“The agreement offsets the reduction in sales for certain military programs with Airbus (defense and space division), explained the president and chief executive officer at Héroux-Devtek, Martin Brassard, on Friday, in a conference call with analysts. It’s a good gateway with Embraer to show them what we can do. »

We do not know the financial terms of the contract, but it will have positive effects in the longer term, said Cameron Doerksen of National Bank Financial. In a note, the analyst believes that the Longueuil company demonstrates that it can attract new customers in the actuation niche, which could pave the way for new agreements.

The Quebec multinational already counts Embraer among its customers. It manufactures the landing gear for the Brazilian manufacturer’s KC-390 military aircraft.

During the three-month period ending September 30, Héroux-Devtek posted a slight increase in revenues (1.3%), which amounted to 132.7 million. Its net income, however, contracted by 36%, to 4.8 million, or 14 cents per share. Héroux-Devtek attributed this performance, among other things, to supply chain disruptions.

“These issues continued into the second quarter, but they weren’t as severe as the previous quarter,” Doerksen said. The biggest challenges are securing a steady supply from suppliers of parts and raw materials. »

Adjusted profit was 3.6 million, or 10 cents per share, compared to 7.5 million, or 21 cents per share, in the second quarter last year.

This performance nevertheless exceeded the expectations of analysts polled by the firm Refinitiv, who expected a turnover of 124 million as well as an adjusted profit per share of 9 cents.

On the Bay Street floor, investors reacted favorably on Friday. In the morning, the action of Héroux-Devtek took 58 cents, or 4.64%, to trade at $13.07.

Sales generated by the civil aviation sector climbed 10.7% to 131 million. The picture is different on the defense side, where revenue contracted 2.8% to 91 million.

“We believe we are in a good position to improve our performance in the second half of the year,” said Mr. Brassard. Our financial situation allows us to navigate adequately through the current turmoil and seize new business opportunities, whether through internal growth or acquisitions. »

The National Bank Financial analyst agrees. Mr. Doerksen believes that the “worst is behind the company” when it comes to supply difficulties. He is also optimistic about the defense sector, since military spending is expected to grow worldwide for “several more years”.

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  • 15
    Plants operated by Héroux-Devtek in four countries, including Canada.


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