Leonardo boss calls market reaction ‘excessive’ in wake of lower forecast

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Leonardo boss calls market reaction ‘excessive’ in wake of lower forecast

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Leonardo boss calls market reaction ‘excessive’ in wake of lower forecast
By: Tom Kington 11 hours ago Leonardo boss calls market reaction ‘excessive’ in wake of lower forecast Leonardo boss calls market reaction ‘excessive’ in wake of lower forecast Leonardo CEO Alessandro Profumo gave an interview to an Italian newspaper in which he said he had been “transparent” about performance at the helicopter unit. (Pierre Verdy/AFP via Getty Images)

ROME — The CEO of Italy’s Leonardo has suggested that the dip in his firm’s share price was due to an “excessive” reaction by the market in the wake of less than glowing results.

Leonardo’s share price dropped by around one-fifth on Nov. 10, after the firm announced it was reducing its year end forecasts thanks to trouble in its helicopter division.

Long a source of steady profits thanks to lines like the AW139 helicopter, the business has taken a hit partly due to a downturn in offshore business.

“This segment is still suffering from unfavorable market conditions coupled with delays in achieving adequate profitability in specific products and industrial performance below expectations,” the firm said in its third-quarter results.

As a result, Leonardo said it was cutting year-end guidance on new orders from €12-12.5 billion to €12 billion; and revenues from €12 billion to €11.5-12 billion.

The forecast for earnings before interest, taxes and amortization was dropping from €1.25– 1.3 billion to €1.05–1.1 billion, it said.

JPMorgan Chase downgraded the stock to “neutral” from “overweight,” claiming other issues may emerge, as the extent of problems at its helicopter business was only discovered in the last few weeks.

On Friday, Leonardo CEO Alessandro Profumo gave an interview to an Italian newspaper in which he said he had been “transparent” about performance at the helicopter unit.

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“We needed to explain it. Then, my experience of finance tells me that sometimes the market reacts excessively,” Profumo said.

He pointed to the recent appointment of former Chief Financial Officer Gian Piero Cutillo to head the helicopter division as evidence the firm was looking to turn the situation around.

He also said the naming of Lorenzo Mariani as Leonardo’s new marketing chief would be “fundamental for increasing the order book.”

European naval cooperation

In the interview with Italy’s Corriere della Sera, Profumo also warned again about Leonardo being shut out of a naval cooperation deal between Italy shipyard Fincantieri and France’s Naval Group.

The two shipyards are currently discussing an integration of their military work, leading to fears in Italy that radars, combat systems and armaments work on future Italo-French ships might be taken by France’s Thales, which could have a head start in talks because it holds a 35 per cent stake in Naval Group.

“I would not want us to head towards an agreement … without taking into account the fact that Leonardo has capabilities in combat systems, sensors and radars and is competitive at a global level and possibly ahead of French systems,” he said.

“We hope, and we are counting on being able to have our say as a company, also in order to protect the Italian sector,” he added.

Asked if Thales could be favored in talks, he said: “The temptation could be there.

“Looking at the long term, the embryonic European defense must be multipolar and include to all effects Italian, French and British capabilities.”

The need to include British capabilities, he said, would not change with the pending exit from the European Union of the U.K., where Leonardo owns and operates numerous facilities.

“It would be a mistake not to use defense as a way to keep British ties despite Brexit. In this, Leonardo is one of the elements that could be a catalyst in this process,” he said.


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