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Categorized | Equities

Finmeccanica upbeat as core profits rise


Posted on July 31, 2012

A 10 per cent rise in core profits at Finmeccanica has been presented by Italy’s troubled defence and industrial group as evidence that its restructuring and cost-cutting programme is on track to meet year-end targets.

Giuseppe Orsi, promoted as the new broom chief executive and chairman last year after a series of corruption investigations into the group amid heavy losses, said the second-quarter results were particularly encouraging.

    “Despite a national and international environment characterised by considerable persistent uncertainty, Finmeccanica is confident that it will achieve the targets for 2012 announced in March,” Mr Orsi said. He noted that this was “a year of delicate transition within a relaunch process which is demanding and will last some time”.

    The state-controlled group said earnings before interest, tax and amortisation rose 10 per cent to €459m in the second half and a third to €285m in the second quarter. New orders rose 13 per cent to €4.2bn in the second quarter and 7 per cent to €7.7bn in the second half.

    Revenues were down 2 per cent to €8bn in the second half. Net debt rose 11 per cent to €4.6bn. The group’s level of indebtedness is causing concern in some quarters as it is equivalent to the value of its assets and has been called “alarming” by Il Sole 24 Ore, Italy’s leading business daily.

    Analysts said the second-half results were slightly better than expected, and it was encouraging that progress from restructuring was more evident in the second quarter.

    Finmeccanica reported a €2.3bn loss last year. It reaffirmed revenue targets for this year of €16.9bn-€17.3bn and core profits of about €1.1bn.

    Shares in Finmeccanica closed down 2.3 per cent at €2.98 before the results were announced, representing a fall of 44 per cent over the past 12 months.

    Mr Orsi said in a conference call that he was encouraged by interest shown in assets Finmeccanica plans to sell and that he was confident of making “further progress by the end of the year”.

    The Italian group has said previously it hopes to reduce net debt by €1bn this year through asset disposals, including its energy and transport subsidiaries.

    Finmeccanica noted military and security investment budget cuts in its core markets of Italy, the UK and the US, and a shift in demand to emerging markets where intense competition is pushing down prices.

    “Finally, the persistent and worsening recession in the eurozone is making it more difficult – yet, at the same time, vital – to roll out the restructuring initiatives and even more important for companies to achieve a sound financial position,” it said.

    Mr Orsi has removed more than 40 managers since taking the helm, several of whom are under investigation by state prosecutors for suspected corruption. His long-time predecessor, Pier Francesco Guarguaglini, resigned and denies corruption allegations.

    Mr Orsi is also under investigation in connection with a helicopter deal with India. He denies wrongdoing while his supporters in Finmeccanica argue that he is the victim of false allegations made by people he dismissed.