Meggitt warns on profits as aircraft spares market falters

LONDON (Reuters) - Shares in Meggitt (MGGT.L) plunged on Wednesday after the UK engineering firm warned profits this year would be "meaningfully" below forecasts after demand for spare aircraft parts deteriorated and its energy industry business suffered from low oil prices.

The supplier of wheels, brakes and electronic systems to planemakers said trading in the third quarter was below its expectations, with comparative sales down 1 percent, due to a marked deterioration in September.

Meggitt said it sold fewer spare parts for aircraft than anticipated in the period, dealing a blow to the company which makes its best margins in the so-called aftermarket, and a business which one analyst said accounted for about half of group profits.

Shares in Meggitt, a FTSE 100 stock, were 19 percent lower at 372.8 pence at 1202 BST, their lowest level in three years and wiping some 680 million pounds off the company's market value.

Meggitt's equipment on some older types of planes affected its trading in the period as more of those planes were taken out of service and broken up, flooding the market with alternative supplies of spare parts.

Warning that it expected these factors to persist in the fourth quarter, Meggitt said underlying operating profit for the year would come in "meaningfully below" the current consensus market forecast of 369 million pounds.

"We expect 2015 consensus earnings per share will likely come down by around 10 percent, and by more in 2016. Today's warning raises questions on the timing of recent acquisitions," Investec analysts said in a note.

Shares in other UK companies operating in aerospace and defence markets also fell in reaction to Meggitt's trading statement, analysts said. Senior (SNR.L) fell 2.3 percent and Cobham (COB.L) was 3.8 percent lower.

The profit warning came as a surprise after the company in August stuck with its forecast for growth this year, crediting higher spending on military aircraft with offsetting declines in the oil industry-related energy business, which has been under pressure for some time due to the lower oil price.

The group said on Wednesday it was now looking at options to cut around 300 jobs from its global workforce due to the challenging trading conditions in the energy business, where sales fell 16 percent in the third quarter. The business supplies valves for oil and gas projects and accounted for about 10 percent of revenues in 2014.

Organic sales in the military division were down 2 percent in the third quarter, and Meggitt said it was also affected by a number of programme deferrals.

The job cuts would be completed by the end of the first quarter 2016, Meggitt said, but added that it would take an exceptional charge in 2015 to cover the cost.

(Reporting by Li-mei Hoang and Sarah Young; Editing by Greg Mahlich)