Adventures in Equities: United Technologies Group

Showing posts with label United Technologies Group. Show all posts

Monday, 11 June 2012

Rolls-Royce Update: AEC Joint venture.

Rolls-Royce @ 825.50p, +7 (+0.86%).

I see that Rolls-Royce is taking full ownership of its Aero Engine Controls joint venture:

"Engine control systems play an increasingly important part in enhancing the fuel efficiency and overall performance of modern jet engines," Rolls-Royce said on Friday.

"This acquisition will give Rolls-Royce full ownership of a critical capability that confers competitive advantage." (http://in.reuters.com: UPDATE 1-Rolls-Royce buys out controls JV partner Goodrich)

I also notice that the joint venture's partner is Goodrich which itself is in the course of being taken over by United Technologies (Pratt & Whitney owner), which has recently bought out Rolls-Royce's 32.5% stake in the International Aero Engines venture and entered into a new joint venture with Rolls-Royce to produce engines for the 120 - 230 seat aircraft market.

Almost a virtuous circle.

"The British company said it would pay half of the net asset value of AEC once the takeover had completed.

The joint venture, which was designed to break even, had gross assets of 116 million pounds ($180.7 million) at the end of 2011 and net assets of 8 million pounds, along with debt of about 54 million pounds, Rolls-Royce said in a statement. " (http://in.reuters.com: UPDATE 1-Rolls-Royce buys out controls JV partner Goodrich)

My initial thoughts on first seeing the news, was that it might contribute to UTX's fund raising to finance the Goodrich purchase but it barely registers given the scale of the Goodrich acquisition at $16.5bn. (http://www.ft.com: UTC to sell assets to fund Goodrich buy)

Instead it seems more like a sweetener whilst tidying up a little core/non-core business (make/buy).

Related articles:
- http://in.reuters.com: UPDATE 1-Rolls-Royce buys out controls JV partner Goodrich
- http://www.rolls-royce.com: Rolls-Royce to acquire Aero Engine Controls
- http://www.ft.com: UTC to sell assets to fund Goodrich buy

Related posts:
- Rolls-Royce update: IAE stake sale and new joint venture.

Thursday, 13 October 2011

Rolls-Royce update: IAE stake sale and new joint venture.

Rolls-Royce @ 688p, +62p, (+9.9%)

Rolls-Royce flying high in the clouds today on the back of last nights announcement that they are being bought out of their 32.5% stake in the IAE venture for around $1.5bn however they will also continue to profit from flying time for the existing installed base of V2500 engines flying on A320 wings.

This is likely to see future contributions to profits with an estimated £140m in the first year but this contribution is expected to slide over the next 15 years as the fleet ages and replacement aircraft and engines come through.

In the same announcement, Rolls-Royce announced details of a new joint venture with Pratt & Whitney to produce engines for the 120 -230 seat passenger aircraft which serves to fill in a sizeable hole for me as an investor if Rolls-Royce didn't have a presence in this sector of the market which over the next 20 years is expected to require around 45,000 engines and be worth around $2 trillion (Boeing announce 737 MAX for 2017.).

Elsewhere, Rolls-Royce also announced a $99.9 m contract to provide support on the Adour engined T-45 Trainer aircraft used by the US Navy.

This came hot on the heels of news that the company had also taken its first order for its Environship concept for which the company "will design and provide integrated power and propulsion systems for two technologically advanced cargo vessels, which have been purchased by Norwegian transportation company, Nor Lines AS."

Lots of good news then which when you take into account the first delivery of the 787 to All Nippon Airways should have analysts reaching for their eraser and black inked pens particularly when the company is actively giving profit guidance so explicitly.

Friday, 25 March 2011

GE to defy F136 Stop order!

Not quite as dramatic as the headline being used might sound but, following recognition that it had received a stop order from the Pentagon for the development of the F136 (second engine option to the Joint Strike Fighter program), GE has stated its intention to self fund the work, through the 90 day stop work period, as it nears completion of the engine.

The stop order comes on the back of the senate vote of the 17 Feb as referenced in an earlier post - BAE Results and R-R Update.

In justifying its intention the company states that:

"GE said its F136 engine was meeting or exceeding performance expectations and was nearly complete, while the primary F-35 engine built by Pratt & Whitney, a unit of United Technologies Corp UTX.N had amassed $3.4 billion in cost overruns and faces continued delays."

A response from United Technologies stated that $2.7bn of the overrun is due to Pentagon changes!

Likely to rumble on for some time (5 years so far!) and one that seems to have affected the share price of R-R significantly (off its lows but still down 54p from its 52 week high of 665p). Strangely, the affect on GE has been less significant.

Both companies are likely to have had impact from the "nuclear" fallout from Japan's woes also: GE having designed the reactors in question and R-R having a stake in the UK's potential nuclear future.

because of the uncertainty, I have thought for sometime now that it would seem right to discount the F136 from R-R prospects instead focussing on the large civil engine programs: Trent 900; Trent 1000 and Trent XWB.

The company retains a place on the JSF through its lift fan manufacture and, who knows, there may still be a bonus from the F136 in the future as, at 5 years and counting, the engine could well be completed before the program is ultimately cancelled.

Would the Pentagon, and the senate, then pass up the opportunity for the potential life cycle cost savings that competing engines could bring!