Boeing narrowed its net loss 50.6 per cent to $4.1 billion in the fourth quarter from a $8.4bn loss in the same period a year ago as delivery of commercial planes increased in the three months to December 31.
The US firm delivered 99 commercial planes in the October-December period, up 68 per cent from the prior year period.
2021 was a rebuilding year for us as we overcame hurdles and reached key milestones across our commercial, defence and services portfolios
Boeing’s president and chief executive David Calhoun
The quarterly sales of the company dropped almost 3.3 per cent on an annual basis to $14.7bn, falling short of analysts’ estimates of $16.5bn.
The company’s full 2021 financial year’s net loss stood at more than $4.2bn, while revenue increased almost 7 per cent to $62.3bn.
“2021 was a rebuilding year for us as we overcame hurdles and reached key milestones across our commercial, defence and services portfolios,” Boeing’s president and chief executive David Calhoun said.
“As the commercial market recovery gained traction, we also generated robust commercial orders, including record freighter sales … demonstrating progress in our overall recovery, we also returned to generating positive cash flow in the fourth quarter.”
The company said its operating cash flow improved to $716 million in the quarter, reflecting higher commercial volume, increased advance payments and lower expenditures.
Boeing’s cash and investments in marketable securities decreased to $16.2bn in the fourth quarter, compared to $20bn at the beginning of October. The debt stood at $58.1bn, down from $62.4bn at the beginning of the quarter due to the prepayment of a term loan and repayment of maturing debt, the company said.
Sales for Boeing’s commercial plane unit stood flat on an annual basis to about $4.8bn in the three months to December 31. Backlog in commercial planes included more than 4,200 aircraft valued at $297bn, the company said.
Boeing said it had increased 737 Max production and deliveries in the quarter and safely returned the aircraft to service in nearly all global markets.
In December, the Civil Aviation Administration of China issued an airworthiness directive outlining changes required for Chinese airlines to prepare their fleets to resume service.
Since the US Federal Aviation Administration’s approval for the return of the 737 Max to operations in November 2020, more than 300,000 revenue flights have been completed and the reliability of the fleet remains above 99 per cent as of January 24, the company said.
Revenue from the defence, space and security unit decreased 14 per cent to $5.8bn in the fourth quarter.
The global services unit’s revenue increased 15 per cent yearly to $4.3bn in the last quarter. The company’s fourth-quarter operating margin, which was negatively affected by a $220m inventory impairment, increased to 9.3 per cent.
Boeing is facing an increase in expenses in its 787 Dreamliner programme, with $5.5bn in costs tied to manufacturing flaws that have prevented the company from delivering new planes in recent months.
It also took a $3.5bn pre-tax charge for the fourth quarter on its 787 Dreamliners.
“On the 787 programme, we are progressing through a comprehensive effort to ensure every aeroplane in our production system conforms to our exacting specifications,” Mr Calhoun said.
“While this continues to impact our near-term results, it is the right approach to building stability and predictability as demand returns for the long term.”
The company’s research and development expenditure jumped by more than 12 per cent year-on-year in the quarter to $678m, the company said in the statement.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
