Rohr Posts 1st-Quarter Loss of $11 Million, Lays Off 500 Workers
Blaming changes in government requirements that caused a slowdown in deliveries of its aerospace products, Rohr Industries reported an $11.4-million loss Tuesday for its first quarter. The Chula Vista-based manufacturer also said it has laid off nearly 500 employees, or 4% of its work force, since Aug. 1 in an effort to trim overhead.
The loss, which came on revenue of $234.5 million, generally surprised investment analysts, and Rohr stock dropped $2.50 to close at $21.25 in New York Stock Exchange trading Tuesday. Rohr shares have traded as high as $37.875 over the last year. Over the same quarter last year, Rohr made a profit of $7.8 million on sales of $224.9 million.
Rohr spokesman Dick Dalton declined comment on whether Rohr plans more layoffs, saying that Rohr does “no projecting of employment levels.” The layoffs over the last three months were necessary, he said, because Rohr expects to see a “leveling off” of sales in coming months after a two-year period of rapid growth.
Of the 483 Rohr employees who lost their jobs recently, 211 worked at Rohr’s Chula Vista plant, mainly in hourly manufacturing and on the assembly line, he said.
Although it makes a variety of jet aircraft components, Rohr’s biggest-selling products are nacelles, or pods that house jet engines. About 75% of Rohr’s aircraft components are sold to commercial aircraft manufacturers and the rest to makers of military jets.
Over the past two years, the boon in commercial aircraft orders, a highly cyclical business, has caused sales, payroll and plant space at Rohr and other U.S. aerospace manufacturers to grow rapidly. Even after the recent layoffs, Rohr’s current payroll of 11,700 is up significantly from 8,000 workers two years ago.
But Rohr’s profits have often disappointed Wall Street analysts, leading them to question the efficiency with which Rohr is handling its growth. Spokesman Dick Dalton blamed the recent quarter’s loss mainly on added government paper-work requirements that he said have stalled components for military aircraft.
Thomas Lloyd-Butler, a vice president and analyst with Montgomery Securities in San Francisco, said that Rohr’s first-quarter loss was “very unexpected” and that he is “afraid that the cycle in commercial aircraft orders will be over before this company turns a profit. Then they’ll really be hurting.”
For the fiscal year ended July 31, Rohr reported a profit of $33.5 million on sales of $1.045 billion, compared with a profit of $32.5 million on sales of $907 million for the previous fiscal year.
Wolfgang Demisch, managing parter at UBS Securities in New York, said the loss demonstrates that there are margin pressures in Rohr’s commercial aircraft business and that “things will be a little bit tougher.”
“Rohr is digesting an unexpectedly huge surge in commercial orders and the supply of labor and material is a lot tighter than expected,” Demisch said.
Lloyd-Butler said he is particularly concerned about the high debt that Rohr has taken on to finance its growth. Rohr’s interest expense for the quarter ended Oct. 30 was $10.7 million, up from $5.6 million the year before.
“If the company is unable to be profitable in both is its commercial and military lines of business and generate enough cash to service its debt, they are going to go into the . . . downturn of the commercial aircraft cycle in very precarious position,” Lloyd-Butler said.
