Meggitt fears growth hit from 737 MAX difficulties

LONDON: Britain’s Meggitt warned that future growth would be constrained by the halt to production of Boeing’s 737 MAX aircraft and the economic impact of the coronavirus, knocking its shares.

For 2020, Meggitt, which makes aerospace parts, said that organic revenue growth would be between 2% and 4%, trailing the 8% rise recorded last year, while underlying operating profit would take a 20 million pound ($26 million) hit from the two factors.

The impact was split equally, with 10 million pounds from the Boeing issues and 10 million pounds from the rapid spread of the COVID-19 virus, mainly as a result of the drop in air traffic, Meggitt CEO Tony Wood said.

Shares in Meggitt fell 2.5% to 579 pence, making the company one of the biggest fallers on Britain’s bluechip index.

Wood said Meggitt’s guidance was made on the basis of coronavirus playing out in a similar pattern to the SARS outbreak in 2003.

“We are assuming the same as we’ve seen in previous outbreaks,” he said in an interview. “If it was worse than that, then obviously we would be updating on that later on in the year, but we’re assuming essentially it’s a 2020 issue.”

Lower air traffic growth as a result of the virus spread dampens Meggitt’s after-market business, which supplies parts and services to aircraft.

Wood said for Meggitt, that was the main impact of the virus, rather than disruption to supply chains for parts from factory closures in China.