Senior, a UK engineering company, will be forced to lay off staff due to the crisis at Boeing and the delays in returning to full production by Airbus.
Senior, a FTSE 250 company, pays the price of being a major supplier to two troubled aircraft manufacturers.
Senior shares fell more than 12 percent on Tuesday, as a result of a warning that amid strike action at Boeing, and the stalling of deliveries at Airbus due to stalled deliveries, demand for its engine components, fuel ducts and valves connecting various aircraft structure has declined.
The company turned down a takeover offer of 200p per share from the US private equity group Lone Star three years ago. Senior shares were over 300p before the deadly crashes of the Boeing 737 Max six year ago.
In a trading announcement following the end of the third financial quarter, Senior informed investors that: “In near-term, and as has been widely reported, the commercial aircraft manufacturing industry faces temporary but significant headwinds.
The Federal Aviation Administration has restricted the production rate of Boeing’s 737 Max this year following the Alaskan Airlines accident in early 2024 (when an emergency panel blew out during flight).
The company acknowledged that it believed things were looking up after Boeing’s announcement that the 737 Max build rate would increase to 38 per monthly by the end the year.
Airbus still faces supply chain issues
The statement continued: “However with the employee strikes at [Boeing] commercial aircraft operations around Seattle now in their fourth week, there will be an inevitable impact on the operating businesses that are most exposed to the customer, directly as well as through its tier 1 suppliers.
Airbus has also publicly acknowledged the challenges that it faces in its supply chain, particularly with respect to engines and interiors. The other parts of Airbus’ supply chain with which we have agreements have produced at rates that are generally in line with the original schedule.
The Airbus “tier 1” supplier informed us recently that it intends to reduce the scheduled deliveries of Senior by a significant amount in the fourth quarter this year, before returning to normal in the second quarter next year.
The statement continued: “While we are not certain of the full impact to our businesses, we have taken decisive steps to reduce costs and save cash.”
These actions include “aligning the direct and indirect headcount in order to match capacity with sales demand profiles through temporary furloughs as well as permanent headcount reductions”, and “curtailing any discretionary spending”.
The company refused to comment on the number of people that it will be letting go. However, it appears likely that US employees will take the brunt of it. Senior has 6,600 employees, primarily in the US and UK. Nearly half of its revenue comes from the commercial aerospace division.
Congleton and Macclesfield, both in Cheshire, produce fuel ducts and nozzles. The company has a thermal-engineering facility in Royston, Hertfordshire. A factory at Earby, Pennines, produces machined parts.
Senior announced that its civil aerospace division will not be able to match the £16 million profit it achieved in the first half. Last year, the division generated £27 million in profit.
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