UPDATE 2-Meggitt trims growth forecast after production setbacks

Fri Nov 1, 2013 5:21am EDT

(Adds remarks from source close to Meggitt, analyst comment, shares, details)

By Rhys Jones

LONDON Nov 1 (Reuters) - British aircraft parts supplier Meggitt lowered its full-year revenue guidance after several setbacks including production problems in the United States hit third quarter trade, sending its shares sliding on Friday.

The supplier of avionics and wheels to planemakers Airbus and Boeing said it had experienced "production difficulties" at its Sensing Systems business and discovered a "raw material supply issue" dating back to 2012, which it has put 20 million pounds ($32 million) aside to cover.

It added that lower than expected success in winning projects at one of its energy businesses and the recent strengthening of sterling against the U.S. dollar also had a negative impact.

The group now expects to report 2013 revenue growth in the low single digits, below its previous forecast, made in August, of mid-single-digit percent revenue growth.

Prior to Friday's statement, Meggitt had on average been expected to report revenue of 1.69 billion pounds this year, according to Thomson Reuters data.

Shares in Meggitt, which have risen 22 percent in the last three months, were 8 percent down at 527 pence by 0850 GMT, making it Friday's biggest FTSE 100 faller.

"The operational issues are a surprise and you can see the impact of that on its (Meggitt's) shares. The risk of other similar issues cropping up increases in the mind of the market after this type of news," said Liberum analyst Ben Bourne.

Meggitt said it had recently identified the raw material supply issue relating to one unspecified product type dating back to 2012. It said a solution was in place, including where necessary the replacement of the parts over the next few years.

A source close to Meggitt said the problems at the unit making sensors and monitoring systems were related to difficulties consolidating two factories in the east and west coast of the United States.

The raw material issue was that the wrong material had been delivered to the company, the source said, without giving details.

Civil aerospace after-market revenues continued their gradual recovery, rising 2 percent year-on-year in the third quarter, while military revenues were flat, it said.

The civil aerospace market remains strong, said Meggitt, adding that the military outlook was still uncertain due to the lack of clarity on U.S. defence spending. ($1 = 0.6224 British pounds) (Editing by Brenda Goh and Anthony Barker)

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