Magellan Aerospace Company Pronounces Monetary Outcomes

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TORONTO — Magellan Aerospace Company (“Magellan” or the “Company”) launched its monetary outcomes for the third quarter of 2024. All quantities are expressed in Canadian {dollars} except in any other case indicated. The outcomes are summarized as follows:

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1. Overview

A abstract of Magellan’s enterprise and important updates

Magellan is a diversified provider of parts to the aerospace trade. By means of its wholly owned subsidiaries, managed entity and three way partnership, Magellan designs, engineers and manufactures aeroengine and aerostructure parts for aerospace markets, together with superior merchandise for defence and area markets, and complementary specialty merchandise. The Company additionally helps the aftermarket by means of provide of spare elements in addition to performing restore and overhaul providers.

Magellan operates considerably all of its actions in a single reportable section, Aerospace, which is seen as one section by the chief working decision-makers for the aim of useful resource allocations, assessing efficiency and strategic planning. The Aerospace section consists of the design, improvement, manufacture, restore and overhaul, and sale of methods and parts for defence and civil aviation.

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The Business, the Provide Chain

Although world air journey has seen indicators of restoration with each home and worldwide income passenger kilometers, on a mixed foundation, approaching pre-COVID 19 pandemic ranges, Magellan’s monetary outcomes and operations proceed to be influenced by overhanging impacts from the pandemic. These impacts embrace buyer construct price changes (and the influence on manufacturing scheduling), increased enter costs for items and providers, restricted availability of merchandise, disruptions to produce chains and labour shortages. Magellan continues to handle these impacts and strives to mitigate their impact on Magellan’s operations.

Within the first 9 months of 2024, 65.4% of revenues have been derived from business markets whereas 34.6% of revenues associated to defence markets.

Enterprise Replace

On July 25, 2024, Magellan introduced the signing of a Memorandum of Understanding (“MOU”) with Aequs Non-public Restricted (“Aequs”) to discover the event of a marketing strategy for a collectively owned engine upkeep, restore and overhaul (“MRO”) enterprise within the Aequs Particular Financial Zone, at Belagavi in Karnataka, India. Beneath the phrases of this MOU, Magellan and Aequs will work collectively to judge the marketplace for enterprise, business and army plane engine MRO providers, to develop a complete marketing strategy that expands our current partnership into the MRO sector by means of this thrilling new undertaking.

On August 12, 2024, Magellan introduced the signing of great long-term agreements with Pratt & Whitney, an RTX enterprise. These vital contracts renew current agreements and canopy the availability of complicated castings used on a lot of legacy and new engine applications. Magellan’s Haley, Ontario facility and its Glendale, Arizona facility will produce the castings.

For extra data, please check with the “Administration’s Dialogue and Evaluation” part of the Company’s 2023 Annual Report out there on www.sedarplus.ca.

2. Outcomes of Operations

A dialogue of Magellan’s working outcomes for the third quarter ended September 30, 2024

The Company reported income within the third quarter of 2024 of $223.5 million, a $10.5 million enhance from third quarter of 2023 income of $213.0 million. Gross revenue and web revenue for the third quarter of 2024 have been $25.0 million and $5.8 million, respectively, compared to gross revenue of $19.9 million and web revenue of $3.7 million for the third quarter of 2023.

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Consolidated Income

Income in Canada elevated 2.3% within the third quarter of 2024 in comparison with the corresponding interval in 2023, primarily because of increased casting product revenues and better MRO revenues.

Income in the USA elevated by 9.9% within the third quarter of 2024 in comparison with the third quarter of 2023, largely because of increased casting product revenues, elevated plane engine shaft revenues and beneficial international trade impacts as a result of strengthening of the USA greenback relative to the Canadian greenback. On a forex impartial foundation, revenues in the USA elevated 8.1% within the third quarter of 2024 over the identical interval in 2023.

European income within the third quarter of 2024 elevated 3.9% in comparison with the corresponding interval in 2023 primarily pushed by web beneficial transactional and translational international trade impacts offset partly by decrease revenues for single aisle and broad physique plane elements. On a forex impartial foundation, European revenues within the third quarter of 2024 decreased by lower than 1.0% when in comparison with the identical interval in 2023.

Gross Revenue

Gross revenue of $25.0 million for the third quarter of 2024 was $5.1 million increased than the $19.9 million gross revenue for the third quarter of 2023, and gross revenue as a share of revenues of 11.2% for the third quarter of 2024 elevated from 9.4% recorded in the identical interval in 2023. The gross revenue within the present quarter elevated from the identical quarter within the prior 12 months because of quantity will increase and contract rehabilitations on sure applications along with beneficial product combine, offset partly by worth will increase on bought supplies and provides.

Administrative and Normal Bills

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Administrative and normal bills as a share of revenues was 6.1% for the third quarter of 2024, decrease than the identical interval of 2023 share of revenues of 6.5%. Administrative and normal bills decreased $0.3 million or 1.8% to $13.6 million within the third quarter of 2024 in comparison with $13.9 million within the third quarter of 2023 primarily because of decrease data expertise spending offset partly by increased wage and profit prices.

Restructuring

Restructuring in 2023 was primarily associated to ongoing prices related to the closure of the Bournemouth facility and dismantling its former operations.

Different

Whole Different for the third quarter of 2024 included a $1.1 million international trade loss in comparison with a $0.9 million international trade achieve within the third quarter of the prior 12 months. The actions in balances denominated in foreign currency and the fluctuations of the international trade charges influence the web international trade achieve or loss recorded in 1 / 4.

Curiosity Expense

Whole curiosity expense of $1.0 million within the third quarter of 2024 is just like $1.0 million within the third quarter of 2023. Decrease curiosity cost on financial institution indebtedness and long-term debt was offset by increased accretion cost on long-term debt, borrowings and leases.

Provision for Earnings Taxes

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Earnings tax expense for the three months ended September 30, 2024 was $3.4 million, representing an efficient revenue tax price of 36.8% in comparison with 21.4% for a similar interval of 2023. The change within the efficient tax price and present and deferred revenue tax expense 12 months over 12 months was primarily as a result of change in mixture of revenue and losses throughout the completely different jurisdictions through which the Company operates and the reversal of momentary variations.

3. Chosen Quarterly Monetary Data

A abstract view of Magellan’s quarterly monetary efficiency

Revenues and web revenue within the quarter have been impacted by the actions of the Canadian greenback relative to the USA greenback and British pound, when the Company interprets its international operations to Canadian {dollars}. Additional, the actions in the USA greenback relative to the British pound influence the Company’s United States greenback exposures in its European operations. Throughout the durations reported within the quarterly monetary data desk above, the common quarterly trade price of the USA greenback relative to the Canadian greenback fluctuated between a excessive of 1.3684 within the second quarter of 2024 and a low of 1.3412 within the third quarter of 2023. The common quarterly trade price of the British pound relative to the Canadian greenback reached a excessive of 1.7741 within the third quarter of 2024 and hit a low of 1.5953 within the fourth quarter of 2022. The common quarterly trade price of the British pound relative to the USA greenback reached a excessive of 1.3011 within the third quarter of 2024 and hit a low of 1.1747 within the fourth quarter of 2022.

Income for the third quarter of 2024 of $223.5 million was increased than that within the third quarter of 2023. The common quarterly trade price of the USA greenback relative to the Canadian greenback within the third quarter of 2024 was 1.3637 versus 1.3412 in the identical interval of 2023. The common quarterly trade price of the British pound relative to the Canadian greenback elevated from 1.6974 within the third quarter of 2023 to 1.7741 through the present quarter. The common quarterly trade price of the British pound relative to the USA greenback elevated from 1.2658 within the third quarter of 2023 to 1.3011 within the present quarter. Had the international trade charges remained at ranges skilled within the third quarter of 2023, reported revenues within the third quarter of 2024 would have been decrease by $2.8 million.

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The Company’s outcomes through-out fiscal 2022 and 2023 have been negatively impacted by the continued results of the COVID-19 pandemic by way of diminished volumes and provide chain disruptions. The lower in profitability within the fourth quarter of 2022 was primarily the results of the impact of inflation in supplies, provides, utilities and labour; and provide chain disruptions which impacted manufacturing of products leading to manufacturing system inefficiencies and decrease absorption of producing provides. These impacts, though not as important, continued to influence the ends in 2023. In comparison with the quarterly revenues in 2023, the Company has seen modest progress in similar quarter versus quarter revenues as world air journey continues to get well to pre COVID-19 ranges.

4. Reconciliation of Internet Earnings to EBITDA and Adjusted EBITDA

An outline and reconciliation of sure non-IFRS measures utilized by administration

Along with the first measures of earnings and earnings per share (primary and diluted) in accordance with IFRS, the Company consists of EBITDA (web revenue earlier than curiosity, revenue taxes and depreciation and amortization) and Adjusted EBITDA (web revenue earlier than curiosity, revenue taxes, depreciation and amortization, goodwill impairment and restructuring) on this MD&A. The Company has offered these measures as a result of it believes this data is utilized by sure buyers to evaluate monetary efficiency and that EBITDA and Adjusted EBITDA are helpful supplemental measures as they supply a sign of the outcomes generated by the Company’s principal enterprise actions previous to consideration of how these actions are financed and the way the outcomes are taxed within the numerous jurisdictions. Every element of those measures is calculated in accordance with IFRS, however EBITDA and Adjusted EBITDA usually are not acknowledged measures underneath IFRS, and the Company’s methodology of calculation might not be comparable with that of different firms. Accordingly, EBITDA and Adjusted EBITDA shouldn’t be used as options to web revenue as decided in accordance with IFRS or as options to money offered by or utilized in operations.

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Adjusted EBITDA within the third quarter of 2024 elevated $3.0 million to $21.5 million as in comparison with $18.5 million in the identical quarter of 2023 primarily because of the gross margin enhancements mentioned earlier.

5. Liquidity and Capital Assets

A dialogue of Magellan’s money movement, liquidity, credit score amenities and different disclosures

The Company’s liquidity wants might be met by means of a wide range of sources together with money readily available, money offered by operations, short-term borrowings from its credit score facility and accounts receivable securitization program, and long-term debt and fairness capability. Principal makes use of of money are for operational necessities, capital expenditures, frequent share repurchases and dividend funds. Primarily based on present funds out there and anticipated money movement from working actions, administration believes that the Company has enough funds out there to satisfy its liquidity necessities at any cut-off date. Nevertheless, if money from working actions is decrease than anticipated or capital tasks exceed present estimates, or if the Company incurs main unanticipated bills, it could be required to hunt further capital within the type of debt or fairness or a mixture of each.

Money Circulation from Operations

For the three months ended September 30, 2024, the Company generated $18.6 million of money from working actions, in comparison with $1.2 million generated within the third quarter of 2023. Modifications in non-cash working capital objects offered money of $1.8 million, $16.6 million extra when in comparison with $14.8 million money used within the prior 12 months. The quarter over quarter adjustments have been largely attributable to decreases in accounts receivables from timing of buyer funds, decrease will increase in inventories because of timing of manufacturing and cargo offset partly by decreases in accounts payable, accrued liabilities and provisions primarily pushed by timing of provider funds.

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Investing Actions

Investing actions used $7.2 million of money within the third quarter of 2024 in comparison with $5.4 million money utilized in the identical quarter of the prior 12 months, a rise of $1.8 million in investing actions primarily because of increased ranges of funding in property, plant and tools offset partly by decrease spending on intangible and different property.

Financing Actions

Financing actions used $13.0 million of money for the third quarter of 2024 in comparison with $2.9 million of money generated in the identical quarter of the prior 12 months. The quarter over quarter change was largely attributable to decreases in financial institution indebtedness.

On June 14, 2023, the Company prolonged its Financial institution Credit score Facility Settlement (“2023 Credit score Facility”) with a syndicate of lenders for an extra two-year interval expiring on June 30, 2025. The 2023 Credit score Facility gives for a multi-currency world working credit score facility to be out there to Magellan in a most combination quantity of $75 million. The 2023 Credit score Facility additionally features a $75 million uncommitted accordion provision, which gives Magellan with the choice to extend the scale of the working credit score facility to $150 million. Extensions of the 2023 Credit score Facility are topic to mutual consent of the syndicate of lenders and the Company. At September 30, 2024, there have been drawings underneath the 2023 Credit score Facility of $29.9 million, together with letters of credit score totaling $3.7 million.

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As at September 30, 2024, the Company had contractual commitments to buy $24.9 million of capital property.

Dividends

Throughout every of the primary, second and third quarters of 2024, the Company declared quarterly money dividends of $0.025 per frequent share and has paid combination dividends of $4.3 million 12 months thus far.

Subsequent to September 30, 2024, the Company declared dividends to holders of frequent shares within the quantity of $0.025 per frequent share payable on December 31, 2024, to shareholders of file on the shut of enterprise on December 17, 2024. The Board of Administrators of the Company continues to evaluation its dividends on a quarterly foundation to make sure that the dividend declared balances the return of capital to shareholders whereas sustaining enough monetary flexibility and funding for progress initiatives.

Regular Course Issuer Bid

On Might 24, 2024, the Company’s software to increase its regular course issuer bid was accepted, which permits the Company to buy as much as 2,857,469 frequent shares, over a 12-month interval commencing Might 28, 2024 and ending Might 27, 2025.

Throughout the 9 month interval ended September 30, 2024, the Company bought a complete of 87,942 frequent shares for cancellation at a quantity weighted common worth of $7.83 per frequent share at a value of $0.7 million. Throughout the identical interval within the prior 12 months, the Company bought 144,311 frequent shares for cancellation at a quantity weighted common worth of $7.30 per frequent share at a value of $1.1 million.

Excellent Share Data

The approved capital of the Company consists of a vast variety of desire shares, issuable in sequence, and a vast variety of frequent shares. As at November 1, 2024, 57,143,255 frequent shares have been excellent and no desire shares have been excellent.

6. Monetary Devices

A abstract of Magellan’s monetary devices

Spinoff Contracts

The Company operates internationally, which supplies rise to a threat that its revenue, money flows and shareholders’ fairness could also be adversely impacted by fluctuations in international trade charges. Forex threat arises as a result of the quantity of the native forex receivable or payable for transactions denominated in foreign currency might fluctuate because of adjustments in trade charges and since the non-Canadian greenback denominated monetary statements of the Company’s subsidiaries might fluctuate on consolidation into the reporting forex of Canadian {dollars}. The Company on occasion might use by-product monetary devices to assist handle international trade threat with the target of lowering transaction exposures and the ensuing volatility of the Company’s earnings. The Company doesn’t commerce in derivatives for speculative functions. Beneath these contracts (forwards and collars), the Company is obligated to buy specified quantities of forex – typically both the USA greenback (“USD”) or British Pound (“GBP”) – at predetermined dates and trade charges if sure situations are met. The counterparties to the international forex contracts are all main monetary establishments with excessive credit score rankings. A lot of these contracts are designated as money movement hedges.

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As at September 30, 2024, international trade contracts of USD $4.0 million and GBP 23.5 million have been excellent with an immaterial mark-to-market honest worth loss. As well as, the Company had international trade collar contracts excellent of USD $32.4 million, which lengthen to June 2025, with a mark-to-market honest worth lack of $0.9 million.

As at September 30, 2024, the Company has $0.9 million of by-product liabilities because the honest worth of its by-product contracts [December 31, 2023 – $1.3 million] in Accounts payable, accrued liabilities and provisions on the interim condensed consolidated assertion of economic place.

Off-Steadiness Sheet Preparations

The Company doesn’t have any off-balance sheet preparations which have or moderately are more likely to have a fabric impact on its monetary situation, adjustments in monetary situation, revenues or bills, outcomes of operations, liquidity, capital expenditures or capital assets. In consequence, the Company is just not uncovered materially to any financing, liquidity, market or credit score threat that might come up if it had engaged in these preparations.

7. Associated Celebration Transactions

A abstract of Magellan’s transactions with associated events

For the three month interval ended September 30, 2024, the Company had no materials transactions with associated events as outlined in IAS 24, Associated Celebration Disclosures.

8. Threat Components

A abstract of dangers and uncertainties dealing with Magellan

The Company manages a lot of dangers in every of its companies as a way to obtain an appropriate degree of threat with out hindering the power to maximise returns. Administration has procedures to assist establish and handle important operational and monetary dangers.

For extra data in relation to the dangers inherent in Magellan’s enterprise, reference is made to the data underneath “Threat Components” within the Company’s Administration’s Dialogue and Evaluation for the 12 months ended December 31, 2023 and to the data underneath “Dangers Inherent in Magellan’s Enterprise” within the Company’s Annual Data Type for the 12 months ended December 31, 2023, which have been filed with SEDAR at www.sedarplus.ca.

9. Outlook

The outlook for Magellan’s enterprise in 2024

Suppliers of economic aerospace merchandise are dealing with a brand new interval of great uncertainty. The current strike by Boeing’s machinists’ union has added stress to what was already changing into a problem for suppliers to forecast manufacturing demand. Up till the strike, Boeing suppliers have been manufacturing 737 parts at increased charges than Boeing was outputting plane. This was a deliberate effort to keep up the availability chain whereas Boeing ultimately ramped up plane manufacturing. For numerous causes of delay, Boeing rescheduled the manufacturing ramp up twice throughout 2024, creating stock surpluses past what was initially deliberate, forcing suppliers to decelerate or cease manufacturing of 737 parts. The strike then halted all manufacturing and supply actions on 737, 767 and 777 applications. As effectively, 777-9 flight exams have been positioned on maintain, additional delaying program certification and prompting Boeing to announce that the primary flight of the plane could be moved out to 2026. Boeing later reported that manufacturing of the 767F (freighter) plane could be ending as soon as current orders have been stuffed, whereas manufacturing of the KC-46 tanker model would proceed.

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In October, Boeing introduced that it might be reducing roughly 10% of its workforce in a plan to restructure its enterprise and to align with its “monetary actuality” amid the machinists’ strike and quite a few different enterprise challenges. Suppliers, together with sure Magellan divisions, are dealing with workforce selections as a way to handle prices in mild of diminished manufacturing demand.

For aerospace suppliers, the Boeing state of affairs is compounded by delayed program ramp charges at Airbus. In June, Airbus introduced that it was transferring its manufacturing goal of 75 A320neo plane per thirty days out to 2027 from 2026, because of “persistent” and “particular” supply-chain points. Contemplating the “imbalance of provide” into completely different elements of the plane, Airbus indicated that it intends to cut back scheduled deliveries from Tier I suppliers within the fourth quarter of 2024 earlier than returning to beforehand introduced charges through the second quarter of 2025.

Airbus was planning to provide between 58 and 62 A320 plane per thirty days by the top of 2024. The precise construct price has not been disclosed. The A350 price is at 6 plane per thirty days ramping as much as 7 after which 8 plane per thirty days in 2025. For 2028, 12 plane per thirty days is deliberate. In the meantime, the A330 price is at 4 plane per thirty days, and the A220 is at 10 plane per thirty days.

Throughout the defence market, budgets proceed growing as nations search to modernize their fleets. Driving the surge of elevated European protection spending, Boeing Protection secured its largest-ever Apache international order for 96 AH-64E assault helicopters with Poland, and secured Overseas Navy Sale (“FMS”) approval for as much as 36 AH-64Es to South Korea. Boeing’s modernized Block II CH47 Chinook helicopter can also be having fun with success with Germany, the UK and doubtlessly Poland procuring these variations.

In the meantime, Sikorsky and the US Military are negotiating a deal to increase UH-60 Black Hawk helicopter manufacturing to 2032. When the US Military cancelled the brand new Future Armed Reconnaissance Plane (“FARA”) program, it dedicated to buying extra Black Hawks from Sikorsky and CH-47 Block II Chinook helicopters from Boeing. Sikorsky can also be engaged in an effort to modernize its UH-60s, together with creating and testing autonomous flight expertise and integrating the brand new GE T901 Improved Turbine Engine.

Lockheed Martin resumed F-35 deliveries in July of this 12 months after the Pentagon agreed to simply accept an interim model upfront of receiving the brand new Technical Refresh (TR-3) configuration. Throughout the Pentagon’s prior supply maintain interval, Lockheed continued producing plane at full price and consequently parked roughly 100 new F-35s. Specialists speculate it is going to take roughly a 12 months for Lockheed to ship these plane. With a worldwide fleet now exceeding 1,000 F-35s, officers said that this system has now reached “a degree of dimension and power, essentially remodeling the best way allied forces practice, function and dominate the skies, collectively”. In complete, nineteen nations are anticipated to function F-35s.

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The aerospace provide base is welcoming the constructive information popping out of the defence aerospace market particularly as manufacturing demand uncertainty within the business aerospace market persists. With each massive business plane producers additional delaying program ramp ups and implementing requisite de-stocking actions, they’re forcing suppliers to institute price mitigation actions simply as submit pandemic capability was being restored. This case once more illustrates how delicate the aerospace trade is to singular occasions.

Extra Data

Extra data regarding Magellan Aerospace Company, together with the Company’s annual data type, might be discovered on the SEDAR web page at www.sedarplus.ca.

Ahead Wanting Statements

This information launch accommodates sure forward-looking statements that mirror the present views and/or expectations of the Company with respect to its efficiency, enterprise and future occasions. Such statements are topic to a lot of uncertainties and assumptions, which can trigger precise outcomes to be materially completely different from these expressed or implied. These ahead trying statements might be recognized by the phrases similar to “anticipate”, “proceed”, “estimate”, “forecast”, “anticipate”, “might”, “undertaking”, “may”, “plan”, “intend”, “ought to”, “imagine” and comparable phrases suggesting future occasions or future efficiency. Particularly there are ahead trying statements contained underneath the heading “Overview” which outlines sure expectations for future operations. These statements assume the continuation of the present regulatory and authorized surroundings; the continuation of traits for passenger airliner and defence manufacturing and are topic to the dangers contained herein and outlined in our annual data type. The Company assumes no future obligation to replace these forward-looking statements besides as required by regulation.

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View supply model on businesswire.com: https://www.businesswire.com/information/residence/20241105176649/en/

Contacts

For extra data contact:

Phillip C. Underwood
President & Chief Government Officer
T: (905) 677-1889
E: phil.underwood@magellan.aero

Elena M. Milantoni
Chief Monetary Officer
T: (905) 677-1889
E: elena.milantoni@magellan.aero

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