Release Date: July 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Dassault Aviation SA (DUAVF) has secured orders for 95 Rafale aircraft, including 18 additional orders from Indonesia, indicating strong demand for its military aircraft.

• The company is making significant progress in its Future Combat Air System project, collaborating with German, Spanish, and French teams to advance to Phase B and build the first demonstrator.

• The Falcon 6X aircraft has demonstrated excellent reliability with over 400 flights and 600 flying hours, receiving positive feedback for its comfort and performance.

• Dassault Aviation SA (DUAVF) is committed to carbon neutrality, actively working with Paris Airport to reduce CO2 emissions and promoting the use of Sustainable Aviation Fuel (SAF).

• The company is undertaking a strong recruitment effort, planning to hire 2,000 people in 2024, with over 1,000 already recruited in the first half of the year, to support its production pace and replace retiring employees.

Negative Points

• Dassault Aviation SA (DUAVF) is facing significant supply chain challenges, particularly in aerostructures and small equipment, leading to delays in assembly lines and aircraft deliveries.

• The sluggish market for Falcon aircraft, with only 11 orders compared to 12 last year, is attributed to delays in certification and supply chain issues affecting the 6X and 10X models.

• The company is experiencing financial strain due to price increases from suppliers, impacting its ability to deliver aircraft on time and manage costs effectively.

• Despite efforts to modernize its industrial infrastructure, Dassault Aviation SA (DUAVF) is still dealing with challenges in transferring operations from Argenteuil to Cergy, expected to complete by the end of 2024.

• The European Commission has not accepted Dassault Aviation SA (DUAVF) in the European taxonomy for civil aviation, despite its commitment to reducing carbon emissions by 2050, leading to ongoing procedural disputes.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with DUAVF.

Q: Can you provide more details on the supply chain challenges and how they are impacting production? A: Eric Trappier, Chairman of the Board, CEO: The supply chain issues, particularly in aerostructures and small equipment, are causing delays in our assembly lines. This is a widespread issue affecting the entire aeronautical industry, including companies like Airbus. We are actively working with our suppliers to mitigate these challenges, but it remains a significant concern impacting our ability to deliver on time.

Q: What is the status of the Rafale orders and deliveries? A: Eric Trappier, Chairman of the Board, CEO: We have delivered six Rafales to France in the first half of the year and have 18 more for Indonesia in our backlog. We are working on the F4 standard and preparing for the F5 standard, which includes a combat drone. Export prospects are ongoing with discussions in several countries.

Q: How is the Falcon business performing, and what are the expectations for the 6X and 10X models? A: Eric Trappier, Chairman of the Board, CEO: The Falcon market is sluggish due to the transition to new models. The 6X has faced certification delays, but its reliability and performance are well-received. The 10X is scheduled for delivery in 2027, and we are adjusting our programs to address supply chain difficulties.

Q: What are Dassault Aviation's efforts towards sustainability and carbon neutrality? A: Eric Trappier, Chairman of the Board, CEO: We are committed to being carbon neutral by 2050. We are using Sustainable Aviation Fuel (SAF) to reduce CO2 emissions and are working with the European Commission to promote SAF. Despite not being included in the European taxonomy, we continue to push for recognition of our efforts.

Q: Could you elaborate on the financial performance and outlook for 2024? A: Eric Trappier, Chairman of the Board, CEO: Our net sales reached EUR 2.533 billion, with an operating income of EUR 170 million. We maintain our guidance for 2024, expecting to deliver 20 Rafales and 35 Falcons, achieving approximately EUR 6 billion in revenue. Our cash position is strong, supported by downpayments for exported Falcons.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.