Tag: Precision Castparts

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Precision Castparts Corporation (PCC), a subsidiary of Berkshire Hathaway, reported robust financial results for the first half of fiscal year 2024, driven by strong demand for its aerospace products.

PCC’s revenues reached $2.7 billion in the second quarter and $5.2 billion in the first six months of 2024, marking increases of 15.0% and 12.6%, respectively, compared to 2023. This growth was primarily due to higher demand for aerospace products and, to a lesser extent, power generation products.

Long-term industry forecasts predict continued growth and strong demand for air travel and aerospace products.

PCC’s pre-tax earnings saw a significant rise of 27.5% in the second quarter and 22.4% in the first six months of 2024 compared to the previous year, driven by increased sales and improved manufacturing and operating efficiencies. Future revenue and earnings growth will depend on PCC’s ability to scale production to meet the anticipated rise in aerospace product demand.

PCC is a global, diversified manufacturer of complex metal components and products, serving the aerospace, power, and general industrial markets. Its Airframe Products division is a leading manufacturer of engineered fasteners, fastening systems, metal components, and assemblies for various sectors, including aerospace, transportation, and power generation.

© 2024 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Berkshire Hathaway’s subsidiary, Precision Castparts Corporation (PCC), reported robust financial results for the fiscal year 2023, showcasing significant growth and resilience in its operations.

In 2023, PCC’s revenues surged to $9.3 billion, marking a notable increase of $1.7 billion or 22.7% compared to the previous year. This impressive growth was primarily fueled by heightened demand for aerospace products, which form a substantial part of PCC’s revenue stream. Additionally, contributions from power/energy and general and industrial products also played a role in driving overall revenue growth.

The surge in demand for aerospace products aligns with long-term industry forecasts, which project sustained growth and robust demand for air travel and aerospace products. This bodes well for PCC’s future revenue streams and underscores its strategic position in a dynamic market.

Furthermore, PCC’s pre-tax earnings in 2023 stood at $1.5 billion, representing a notable increase of 30.0% compared to 2022. The improved financial performance in 2023 can be attributed to increased sales and enhanced manufacturing and operational efficiencies within its aerospace businesses. However, it’s worth noting that operating losses in energy products businesses partially offset these gains.

Looking ahead, PCC remains committed to enhancing manufacturing efficiencies, prioritizing safety measures, and gearing up to meet the escalating demand for its products. By focusing on these key areas, PCC aims to solidify its position as a leading provider of precision components in the aerospace and related industries.

Overall, Precision Castparts continues to demonstrate resilience and growth potential, supported by its strategic focus on aerospace products and ongoing efforts to optimize its operations for future opportunities.

© 2024 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Precision Castparts Corporation (PCC), a subsidiary of Berkshire Hathaway, reported robust financial results for the third quarter and the first nine months of 2023.

Revenues reached $2.3 billion in the third quarter and a cumulative $6.9 billion in the first three quarters of the year. These figures represent an outstanding 21.4% growth in the third quarter and an even more remarkable 26.0% surge in the first nine months compared to the previous year.

The company’s pre-tax earnings grew 43.1% in the third quarter and 32.5% in the first nine months of 2023 compared to 2022. The strong results in 2023 were attributed to increases in sales and improved manufacturing and operating efficiencies.

In 2023, the company experienced higher demand for aerospace products, which formed the primary driver behind the impressive revenue increases. However, it’s worth noting that PCC’s diverse product portfolio, which includes power/energy and general and industrial products, also made substantial contributions to the overall financial success.

The aviation and aerospace industry has consistently shown resilience and robust growth, even amidst global challenges. The long-term industry forecasts underscore the promising outlook, predicting sustained expansion and a continued surge in demand for air travel and aerospace products.

As the world gradually rebounds from the challenges of the past couple of years, the appetite for aerospace innovations and travel experiences remains strong.

© 2023 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Berkshire Hathaway’s Precision Castparts (PCC) has reported robust revenue growth in the first quarter of 2023, buoyed by a recovery in its aerospace business.

PCC’s revenues were $2.25 billion, representing a notable 28.1% surge from the previous year. The company is a leading player in the aerospace industry, and its earnings are heavily dependent on sales of aerospace products. The increase in revenue was primarily driven by a rise in demand for aerospace products, although the power/energy and general and industrial products also contributed to the overall revenue growth.

The long-term industry forecasts suggest that there will be strong demand for air travel and aerospace products, which bodes well for PCC’s future prospects. The company’s pre-tax earnings increased by 23.0% in the first quarter of 2023, reflecting an improvement in manufacturing and operating efficiencies.

PCC is a part of Berkshire’s industrial products group, which comprises The Lubrizol Corporation, metal cutting tools/systems IMC International Metalworking Companies, and Marmon Holdings. Marmon is an umbrella group that comprises over 100 autonomous manufacturing and service businesses. It includes leasing for the rail, intermodal tank container, and mobile crane industries, equipment and systems for the livestock and agricultural industries (CTB International), and a variety of industrial products for diverse markets (Scott Fetzer and LiquidPower Specialty Products).

Starting from October 19, 2022, Marmon also includes businesses acquired in connection with Alleghany, such as the structural steel fabrication products business conducted through W&W|AFCO Steel, as well as other businesses that became part of Marmon.

The combined revenues of Berkshire Hathaway’s industrial products group increased by $1.4 billion (18.6%) in the first quarter of 2023 compared to 2022, and pre-tax earnings grew by $225 million (18.5%). The pre-tax earnings as a percentage of revenues for the group were 16.3% for both the first quarters of 2023 and 2022. The operating results of the group in the first quarter of 2023 were impacted by business acquisitions and overall improved operating results at the pre-existing businesses.

Berkshire Hathaway’s overall operating earnings for Q1 2023 were a remarkable $8.065 billion, representing a significant increase from the first quarter of 2022, which recorded earnings of $7.160 billion. The conglomerate’s performance has been commendable, considering the challenges posed by the pandemic and the changing economic landscape.

© 2023 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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The restart of the 737 Max assembly line this past summer has yet to alter the trajectory of Berkshire Hathaway’s swooning aerospace manufacturer, Precision Castparts. The company’s profits have crashed landed, and are leading to much wider layoffs than previously disclosed.

Precision Castparts is a worldwide manufacturer of complex metal components and products, provides high-quality investment castings, forgings, fasteners/fastener systems and aerostructures for critical aerospace and power generation applications.

According to The Oregonian, forty percent of Precision Castparts’ workforce will have been laid off by the end of 2020, and its total worldwide layoffs are expected to exceed 13,000 employees.

The number is far larger than the hundreds that it disclosed were laid off in its home state of Oregon in the second quarter.

In June 2020, the company turned its previously announced furloughs in Oregon into layoffs, and added additional layoffs at its Clackamas small structures business operations facility. The company cited the COVID-19 pandemic for the 717 layoffs in Oregon, which represented roughly 24 percent of its workforce in the state.

Plunging Revenues, Dwindling Profits

Falling revenue led to a disastrous third quarter. Precision Castparts’ reported third-quarter revenues of $1.5 billion, down 41.4% from the same quarter of 2019, and third quarter profits were down a stunning 80%.

“The COVID-19 pandemic contributed to material declines in commercial air travel and aircraft production,” Berkshire Hathaway disclosed in its most recent quarterly filing. “Airlines responded to the pandemic by delaying delivery of aircraft orders or, in some cases, cancelling aircraft orders, resulting in significant reductions in build rates by aircraft manufacturers and significant inventory reduction initiatives being implemented by customers.”

When Berkshire Hathaway acquired the company for roughly $37 billion in January 2016, it believed it had found one of Warren Buffett’s famed “elephants”—a company that had durable advantages that created a wide moat. At the time, the acquisition was Berkshire’s biggest ever, topping its $26 billion purchase of BNSF Railway in 2009.

While manufacturing for aerospace doesn’t have the same moat as a regulated utility or a railroad, it still has a huge barriers to entry due to the high cost of manufacturing specialized parts, and the unlikelihood that a customer will switch suppliers once a plane begins its production run.

Before Berkshire Hathaway acquired the company, Precision Castparts had an alluring annual growth rate of 23% over the previous ten years. Almost five years later, growth has evaporated, and the company has already taken $300 million in charges in 2020 to cover the costs of restructuring and inventory write-downs.

A Turbulent Future

Despite the good news that the F.A.A. is finally allowing Boeing’s 737 Max to return to commercial service after being grounded for twenty months, long term Precision Castparts is facing headwinds due to reduced demand over the next decade for aerospace parts.

Boeing, one of the company’s biggest customers, is revising downward the number of commercial airliners it will be building over the next ten years. The 2020 Boeing Market Outlook projected an overall demand for 18,350 commercial airplanes in the next decade — 11% lower than Boeing’s 2019 forecast.

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Berkshire Hathaway’s Precision Castparts will have reduced demand over the next decade for its aerospace parts that it supplies to the commercial airline industry, according to a new report issued by Boeing.

Precision Castparts manufactures parts for both Boeing and its rival Airbus, and in February the company laid off 150 Oregon workers as the production Boeing’s 737 MAX was halted. Boeing’s market projections show that its troubles are broader than just the issues it has faced with the 737 Max.

The 2020 Boeing Market Outlook projects that the commercial aviation and services markets will continue to face significant challenges due to the COVID-19 pandemic, while global defense and government services markets remain more stable.

Airlines globally have begun to recover from a greater than 90% decline in passenger traffic and revenue early this year, but a full recovery will take years, according to the Boeing outlook.

As it relates to Precision Castparts’ revenues, the 2020 Boeing Market Outlook projects an overall demand for 18,350 commercial airplanes in the next decade – 11% lower than Boeing’s 2019 forecast.

On the positive side, in the longer term, with key industry drivers expected to remain stable, the commercial fleet is forecasted to return to its growth trend, generating demand for more than 43,000 new airplanes in the 20-year forecast time period.

The BMO also projects a $2.6 trillion market opportunity for defense and space during the next decade. This spending projection reflects the ongoing importance of military aircraft, autonomous systems, satellites, spacecraft and other products to national and international defense. This demand continues to be global in nature with 40 percent of expenditures expected to originate outside of the United States.

In addition to the 2020 Boeing Market Outlook, Boeing also released its 2020 Commercial Market Outlook. Its Commercial Market Outlook is the longest-running jet forecast and is regarded as the most comprehensive analysis of the commercial aviation industry. The Commercial Market Outlook forecast projects:

• Over the next 20 years, passenger traffic growth is projected to increase by an average of 4% per year.

• The global commercial fleet is expected to reach 48,400 by 2039, up from 25,900 airplanes today. During this period, Asia will continue to expand its share of the world’s fleet, accounting for nearly 40% of the fleet compared to about 30% today.

• Single-aisle airplanes such as the 737 MAX will continue to be the largest market segment, with operators projected to need 32,270 new airplanes in the next 20 years. Single-aisle demand will recover sooner due to its key role in short-haul routes and domestic markets as well as passenger preference for point-to-point service.

• In the widebody market, Boeing forecasts demand for 7,480 new passenger airplanes by 2039. Widebody demand will be affected by a slower recovery in long-haul markets – typical after air-travel shocks – as well as uncertainties from COVID-19’s impact on international travel.

• Air cargo demand, a relative bright spot in 2020, is expected to grow 4% annually and generate further demand for 930 new widebody production freighters and 1,500 converted freighters over the forecast period.

In summary, the 43,110 projected airplane types projected by Boeing are:

Regional jets 90 and below 2,430
Single-aisle 90 and above 32,270
Widebody 7,480
Freighter widebody 930

Lastly, as it impacts Precision Castparts, the 11% projected decline in demand for commercial airplanes in the next decade does not take into account competition from China’s budding commercial aviation industry. While only in its infancy at this time, it is not clear what threat it will pose to established manufacturers Boeing and Airbus, and whether Chinese commercial planes will use parts manufactured by Precision Castparts, or instead use parts from domestic suppliers.

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Berkshire Hathaway’s aerospace manufacturer Precision Castparts has turned its previously announced furloughs in Oregon into layoffs, and added additional layoffs at its Clackamas small structures business operations facility.

The company cites the COVID-19 pandemic for the layoffs. The total number of layoffs in Oregon is 717, which represents roughly 24 percent of its workforce in the state.

“As the impact of the pandemic and other macroeconomic factors have weighed on the nation, many of our customers have or intend to curtail or reduce their production,” communications director David Dugan wrote in an email published in the Oregonian. “Due to the resulting impact on orders, we have significantly reduced our workforce to align our production with our customers’ needs.”

Precision Castparts is a worldwide manufacturer of complex metal components and products, provides high-quality investment castings, forgings, fasteners/fastener systems and aerostructures for critical aerospace and power generation applications.

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

(BRK.A), (BRK.B)

Berkshire Hathaway’s aerospace company Precision Castparts has given pink slips to 150 workers in Oregon.

The layoffs are due to the suspension production of Boeing’s 737 Max.

The company has positions across a broad swath of next-generation commercial platforms, including Boeing’s 737 MAX, 777X, 787, and Airbus’s A320neo and A350 XWB.

There is still no firm date on the resumption of production, however, the latest estimates stretch into the summer of 2020 with some deliveries running up to two years late.

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Berkshire Hathaway’s Precision Castparts is making progress on its mitigation of heavy metals pollution at its Portland, Oregon plant, according to the Department of Environmental Quality.

The DEQ’s report notes that stormwater testing shows that water discharged into Johnson Creek is no longer contaminated thanks to the water filtration tank system that Precision Castparts installed in 2016.
Under the supervision of the EPA, contaminated soil on the property has been removed.

“In a portion of the site, there were some impacted areas affected by PCBs — or polychlorinated biphenyl — contamination so we had some sampling done there and discovered that there were impacts,” DEQ NW Region Cleanup and Site Assessment Manager Paul Seidel said on KOIN TV. “So that has been cleaned up in part under US-EPA oversight. There’s still more work to do there but there’s been a substantial amount of work completed in the last several years.”

© 2019 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.