Our latest Aerospace & Defence (A&D) Barometer indicates continued pressure and supply risks remain on all key materials, especially skilled manufacturing labour. The financial outlook remains positive but profitability and cash is likely to come under pressure in the next two quarters.
With shortages continuing in electronics and investment shifting toward newer technologies, A&D players should carefully review their portfolio of solutions and assess the sustainability of their supply. Migrating old electronics to newer platforms is becoming strategic.
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Key findings from the Barometer:
- Commodity prices soar over the past year: For example, aluminium price increasing by 27% YoY and copper by +23 percent YoY.
- Logistics bottlenecks adds inefficiency and cost for all players: Extreme cost and capacity pressure in container (Baltic Index +419 percent YoY).
- Manufacturing labour remains tight: Manufacturing vacancies (US +87 percent YoY, Germany +105 percent YoY, UK +105 percent YoY, France +69 YoY) and reducing unemployment supporting wage inflation.
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About the Industrial Barometer
The Barometer captures the most important drivers of input cost and as series of leading and lagging indicators of company performance. A&D peers consist of major listed original equipment manufacturers (OEM) and Tier 1 players. Metals and Composite suppliers consist of primary Aerospace input metals and composite input material suppliers.
For electricity prices, manufacturing job vacancies and unemployment metrics, we are tracking movements within selected countries with important global A&D market share. US electricity prices are based on average price of the top eight largest A&D revenue states, according to the AIA.
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For further information on the Industrial Barometer please contact Florent Maisonneuve or Gerrit Loots.
Related Insights
Traditional approaches to performance improvement have tended to focus on EBITDA improvement or cashflow improvement as separate challenges that can be addressed by separate teams and are owned by separate functions. Sales are responsible for growing revenue; procurement is responsible for lowering cost; operations are responsible for inventory; and finance and shared service centers are responsible for cash. However, we believe that integrating these approaches is critical for Aerospace & Defense industry organizations. Those with a unified capital management strategy will not only weather the current turbulence but emerge as market leaders in the post-COVID-19 world.
Read A&M's thoughts on how the airline industry is responding to the Covid-19 pandemic in our article published in the AIRA Journal.
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