By Jonathan Buck
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Aerospace and defense company Meggitt PLC (MGGT.LN) Friday said its civil markets showed signs of stability and that it expected cost cutting to substantially mitigate the impact of the downturn on its margins.
"The lower cost base, together with our large installed fleet, sole source positions and sound financial position, leave us well placed to benefit when economic conditions improve," the company said in a trading statement covering the period from July 1 to Oct. 30.
Trading for the year continued to be in line with the board's expectations.
Meggitt said its civil aerospace customers continued to reduce inventory, but at a slower pace. Air traffic data and the number of landings made by business jets indicated that the civil after-market showed signs of stabilization.
The company's aerospace products include wheels, brakes and anti-skid systems and fire and smoke detection systems, among other things. Sales of aerospace equipment account for roughly two-thirds of Meggitt's revenue. European Aeronautic Defence & Space Co. NV (EAD.FR) unit Airbus, Boeing Co. (BA), the U.S. Department of Defense and the U.K. Ministry of Defence are among its customers.
It added that its military business remained healthy while demand for its energy products was mixed, with industrial/power generation relatively robust but offshore gas-related demand weak due to depressed gas prices.
Meggitt said its cost reduction program, designed to reach a rate of savings of GBP50 million a year by the end of 2010, continued to run ahead of schedule. Its workforce has been cut 12% since July, 2008, and it said it was on track to achieve 2009's increased target savings of GBP25 million.
It said its financial position was strong and it remained well within its bank covenants and debt continued to reduce. "A strong uptake on the scrip dividend suggests that 2009 cash generation will be better than we had anticipated," Meggitt added.
At 0802 GMT, Meggitt's shares traded up 5 pence, or 1.9%, at 237 pence while the FTSE 250 index traded up 0.4%. The stock has gained 59% in value since the start of the year.
-By Jonathan Buck, Dow Jones Newswires; +44 (0)207 842 8237; jonathan.buck@dowjones.com