Magellan Aerospace Corporation Announces Financial Results

TORONTO, March 27, 2014 /CNW/ – Magellan Aerospace Corporation (“Magellan” or the “Corporation”) released its financial results for the fourth quarter of 2013. All amounts are expressed in Canadian dollars unless otherwise indicated.

Overview
A summary of Magellan’s business and significant updates

Magellan is a diversified supplier of components to the aerospace industry and in certain applications for power generation projects. Through its wholly owned subsidiaries, Magellan engineers and manufactures aeroengine and aerostructure components for aerospace markets, including advanced products for defence and space markets and complementary specialty products. The Corporation also supports the aftermarket through the supply of spare parts as well as through repair and overhaul services and in certain circumstances parts and equipment for power generation projects.

The Corporation’s strategy has been to focus on several core competencies within the aerospace industry. These include precision machining of a wide variety of aerospace material, composites, complex high technology magnesium and aluminum alloy castings, repair and overhaul technologies and design of structures. The Corporation is now seeking to leverage these core competencies by achieving growth in applications where these abilities are critical in meeting customer needs.

Business Update

On October 16, 2013 the Corporation announced the successful installation of the first complete ship set of F-35A Lightning II horizontal tail assemblies. This assembly is produced at Magellan’s Winnipeg facility incorporating components manufactured in the Corporation’s Kitchener and New York facilities.

Additionally, on November 8, 2013 Magellan announced a new contract award with Airbus. This award for machined and assembled structural components on the A350 XWB program is expected to generate revenue of approximately US$45 million over the next 4 years.

The Corporation remains confident in the strength of its present market position and is encouraged by the market trends observed in 2013. Magellan’s participation on new platforms such as the A320neo and the A350, the B737 MAX and the B787 and the F-35 are providing good counterbalance to maturing legacy programs. Ongoing efforts to secure further work on next generation aircraft platforms are achieving success, as evidenced by a recent announcement awarding Magellan additional wing ribs on the A320neo platform.

Boeing’s single aisle aircraft production rates continue to be strong with B737 production now at 42 aircraft per month with a plan to increase to 45 aircraft per month by late 2015. Airbus expects to maintain their A320 production rate at 42 aircraft per month through 2014 and then increase to 44 aircraft per month by March 2015. Magellan’s participation on these platforms bodes well for the foreseeable future.

Visibility in the US defence market improved during 2013 as the US government approved the 2014/2015 budget that permits the Pentagon to prioritize programs rather than have them cut indiscriminately by sequestration. As the conflict between budget capacity and operational capability has not been eliminated, fewer orders for more highly capable platforms remain a possible outcome. The Corporation, through a number of its divisions, continues to support some US and Canadian legacy products in the defence market.

The Corporation continues to invest in technology and resources in support of Lockheed Martin’s F-35 Strategic Fighter Program (“F-35 program”). This past year’s successful completion of major program milestones by Lockheed and their partners is encouraging to the F-35 program’s customers and the supply base. The Corporation will benefit from recently announced foreign military sales as they solidify the F-35 program’s backlog. The Canadian government procurement decision for the next generation fighter is still under consideration and review. Magellan continues on track to mature its capabilities in support of the F-35 program requirements.

The integration of new technologies into Magellan’s casting operations is proceeding with increasingly higher levels of production capability being demonstrated. Currently installed additive manufacturing (3D sand printing) equipment is approaching full utilization as a number of customer programs are qualified for production using the process. Other new technology applications, such as semi-automated digital radiography and digital scanning technologies are similarly being qualified as they are become integrated into production programs.

Within Magellan’s space business, progress has been made with the RADARSAT Constellation Mission (“RCM”) Satellite project since the Phase D Contract was signed in the second quarter of 2013. Contracts have been placed with key suppliers which hold a large part of the project value and manufacturing readiness reviews have been completed at most of their facilities. In addition, construction has started on the new RCM integration facility where some of the cost is being shared with the University of Manitoba and Western Economic Diversification Canada.

Finally, the Corporation continues to assess the marketplace to identify complimentary opportunities which are in line with its core competencies.