Quickstep Holdings Limited (Quickstep), the Australian advanced composite manufacturing company that is contributing to the Joint Strike Fighter (JSF) program, has posted its December quarter activities and cash flow analysis, revealing a $1.5 million loss for the company’s operating cash flow, but an increase in production rate.
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Quickstep, who are manufacturing parts for the international F-35 Lightning II (JSF) program with Lockheed Martin and Northrop Grumman, are confident that the company will be back in the black next quarter.
Management noted that a $1.8 million German VAT (value-added tax) payment is the reason for the loss and predicted that without this payment, Quickstep would have made a $300,000 profit.
Quickstep's cash position also fell by $3.1 million, down to $5 million from $8.1 million due to a borrowings repayment during the quarter.
However, the quarterly report noted that the $10 million JSF capital investment program in Bankstown, NSW is expected to be completed in the current quarter.
Good news for Quickstep, however, is that seven Lockheed Martin C-130J shipsets were delivered, unchanged from the prior quarter, and they have reportedly achieved an 85 per cent increase in delivered parts for the JSF project in the three months to 31 December 2016.
Quickstep said it delivered 263 parts for the F-35 program in the second quarter of the 2016-17 financial year, compared with 142 parts in the second quarter of the 2015-16 financial year.
Production of these parts is also expected to further ramp up in the quarter ahead.
Quickstep has several supply contracts, estimated at $923 million, with manufacturers to supply F-35 parts for the next two decades.
Quickstep are supplying Marand with 700 sets of carbon fibre composite parts, including skins, fairings and spars, for the F-35 and are supplying Northrop Grumman with 21 composite parts for the F-35, including doors, panels and lower skins.
Quickstep are also confident that they, and the rest of the defence sector, are set to benefit from US President Donald Trump's defence outlook and policy.
"With President Trump looking to boost US military spend, while urging US allies (NATO/Japan) to increase their own military budgets, we suggest that Defence, as an investment thematic, will benefit from the recent changing of the guard in Washington," Quickstep said.
"In particular, we suggest that the (global) manufacturing schedule of the F-35 program could accelerate, which would benefit QHL (Quickstep) directly. Our NPV/PER-derived target price of $0.20 per share (unchanged) indicates some 100 per cent upside potential."