Senior working to mitigate impact of 737 MAX grounding

High technology components and systems manufacturer Senior updated the market on its trading on Thursday, reporting that activity in its Flexonics division in the three months ended 31 March was in line with expectations, including the effect of the sale of its Blois operating business in February.

The FTSE 250 company said market conditions in the division remained consistent with the position it set out on 4 March, adding that it continued to expect margin progression in the division in 2019 to offset the small sales decline.

In the Aerospace division, activity in the period increased with newer programmes ramping up and mature programmes decreasing.

“Following the Lion Air and Ethiopian Airlines tragedies, we have been talking to our 737 MAX aerostructures and propulsion customers about the potential schedule impact on our operating businesses,” the board said in its statement.

“Although these discussions are ongoing and initial schedule changes have not yet been fully defined, we are working hard to mitigate any likely impact following Boeing's announcement of a cut in production to rate 42.”

Senior Aerospace AMT in the Seattle area, which is the Senior Structures division's largest business, had the largest content within Senior on the 737 MAX.

The board said it was the one business in particular that was unlikely to be able to fully mitigate this impact of a cut to rate 42 instead of gearing up for an increase to rate 57.

“AMT has also secured a high level of new content on the Boeing 777X and therefore is already absorbing high new product introduction (NPI) and industrialisation costs as that platform moves closer to entry into service.

“As a consequence, AMT is less able than our other operating businesses to fully absorb the likely impact of the 737 MAX production cuts and this will have some impact on Aerospace margins for the rest of 2019.”

On the military side, Senior said it continued to benefit from the ramp-up in production of the Joint Strike Fighter.

Looking ahead, the board said it was expecting “some impact” from the 737 MAX situation.

“However we are taking action to reduce costs across the group and together with a slightly lower forecast tax rate, we expect only a modest reduction in our earlier expectations.

“We continue to monitor developments on the 737 MAX situation closely and should anything change that affects our current assumptions, we will update the market accordingly.”

Senior said the results for the six-month period to 30 June would be announced on 5 August.