According to a company press release, SGL Group’s (Wiesbaden, Germany) existing long term contracts for components for the Boeing 787-8 Dreamliner have become obsolete, due to widely reported delayed deliveries of the aircraft. Additionally, production volumes of the B787-8 have been markedly reduced compared to the original plan, which however will be replaced by higher volumes of the upcoming B787-9.
Therefore SGL Group has (under IFRS rules) established the necessity of a non-cash writedown of the respective long term PoC receivables (Percentage-of-Completion-Method) in the Business Unit Aerostructures (HITCO) within the Business Area Carbon Fibers & Composites (CFC) of approximately €55 million ($71 million USD). The writedown results primarily from the substantially reduced production levels of the B787-8 and their respective components at one of HITCO’s main customers, a major tier 1 supplier to OEMs in the aerospace industry. Consequently, according to IFRS rules, the long term PoC receivables relating to the B787-8 program need to be written down in Q3/2012, affecting accounting-wise both sales and EBIT (by approximately minus €55 million) of the Business Area CFC.
In line with SGL's contractual rights and aerospace industry practice, SGL Group has filed
a claim with this customer. Potential future compensation payments would reduce the
losses associated with this contract, but can only be booked if and to the extent these
payments are almost certain. Furthermore, SGL Group expects to be compensated in part with higher volumes for components for the B787-9, which however can only be reflected in future earnings. Overall, SGL Group’s EBIT in Q3/2012 remains positive despite the PoC writedown in the Business Unit Aerostructures (HITCO) and is expected to reach a single digit million amount. The underlying performance in Q3/2012 was supported by the final settlementof a long term supply contract with a customer in the Business Area Performance Products. Further guidance from SGL will be issued on Nov. 8.