UNC warns of 'minimal' profit in '94

September 13, 1994|By Kim Clark | Kim Clark,Sun Staff Writer

Because demand for new and rebuilt jet engines has remained weaker than expected, Annapolis-based UNC Inc. warned its investors yesterday that its profits through the end of the year would be "minimal."

The announcement came as a shock to some who follow the company closely, because it means UNC's revenues and income will be lower than the already low estimates projected as recently as two months ago, when UNC announced a major restructuring.

"It is a surprise," said John T. Mahoney, a stock analyst for Raymond James & Associates in St. Petersburg, Fla.

"After the restructuring, people expected that they were looking at bare bones estimates," he said. Now, those estimates will have to be reduced again, Mr. Mahoney said.

The bad news didn't affect the company's stock price much yesterday, though, because "the stock is already beaten up," he said.

UNC's stock on the New York Stock Exchange closed down 25 cents at $5.50 yesterday, after a brief halt in trading for the announcement.

UNC Vice President Gregory M. Bubb said the continued softness in demand over the last several months had also surprised company insiders. Government contracts remain strong. But the civilian aircraft industry, which makes up the bulk of UNC's revenues, is shrinking and undergoing a price war, he said.

UNC has had to cut its prices to keep customers, he said. As a result, revenues were "somewhat less than what we had expected."

When UNC managers realized that the company would not be as profitable as stock analysts had publicly predicted, they wanted to warn investors.

UNC doesn't issue earnings estimates of its own, but said yesterday that third-quarter revenues would be up about 5 percent from the same period last year. And it said that revenues and profits would be flat in the last three months of 1994.

"Net income for this period will be positive but at minimal levels," the company stated.

The flat revenues are expected to continue through early 1995, but Mr. Bubb said profits should increase next year because the company is slashing its costs. He said next year's profits should be "substantial."

The restructuring announced in June called for a reduction of the company's 6,000-person work force to about 5,400, and a savings of about $15 million a year in operating and interest costs, he said.

The cuts have not affected the approximately 100 UNC workers in Maryland, he said.

In addition, the company said it would sell off some divisions, such as operations in New London, Conn., and on the West Coast, to raise cash and reduce debt.

In its most recent quarter, UNC took a restructuring charge of $58.7 million, resulting in a net loss of $54.6 million on revenue of $122.3 million. During the same period of 1993, UNC reported profits of $2.9 million on sales of $94.7 million.

For the full year of 1993, UNC earned $11.1 million on sales of $438.3 million.

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