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Boeing CFO Brian West on July 31 indicated that the troubled airframer and large defense prime will see another year full of red ink when 2024 results are reported, and indeed, it could be worse than he suggested just two months ago.
What is more, the company is again considering further fundraising to pay for its manufacturing system overhaul and to maintain liquidity levels required by investors or credit rating agencies so that Boeing does not lose its investment-grade rating.
The update underlines the scale of the task facing Kelly Ortberg, whose appointment as Boeing's next CEO and president was also announced July 31. The former head of Rockwell Collins will begin in his new role on Aug. 8.
“We’ll continue to actively monitor our liquidity levels and as needed, we’ll supplement our liquidity position with these two objectives in mind,” West told financial analysts during a teleconference while reporting worse-than-expected second-quarter results. “The rating is the priority.”
Officially, Boeing has not and continues not to provide formal financial guidance for the year, leaving stakeholders and observers hanging on West’s every word when he speaks at investor events. At the end of 2023, Wall Street expected Boeing to generate $4-5 billion in free cash flow in 2024 as it ramped up airliner production and delivery.
But that was before the Jan. 5 door plug blowout on an inflight 737-9 and the demand to overhaul its manufacturing system. West in May warned Boeing expected to burn cash in 2024 instead of generating free cash flow. At the time, analysts forecast the cash use at around $1 billion for 2024. But now he said his office expects a “larger use of cash than previously forecasted.”
In the second quarter, Boeing burned about $4 billion in cash, bringing first-half-of-year use to almost $8.3 billion. West said the third quarter would represent another cash burn, which he did not detail in part because much depends on when Boeing ramps up deliveries of airliners. He did not directly answer an analyst’s question whether the fourth quarter will see cash burn too.
“These cash flows can move fairly meaningfully quarter-to-quarter and it’s all predicated on our ability to deliver and get the factory stable and getting it improved,” West said.
For the second quarter of 2024, Boeing reported revenue of $16.9 billion, and a loss per share of $2.33. Revenue dropped 15% from the same 2023 period, while the per-share loss grew almost tenfold. Boeing’s self-defined “core” operating loss of nearly $1.4 billion in the latest quarter dwarfed the $390 million loss a year before. The company ended June 2024 with net debt of around $45.3 billion, up roughly $5 billion from the first quarter of 2024—and after a $10 billion debt raise in May.
“The working capital drag has been pretty meaningful in the first and second quarter, and it’s the inventory as well as the advances as deliveries have been lower,” West said.
Analysts described the latest quarterly results as “pretty awful,” and worse than what were already bad expectations. While Boeing’s commercial airplanes and defense and space divisions lost money, as expected, even the aftermarket-oriented Boeing Global Services only saw a 3% improvement from year-before results.
“Boeing overall has a long road ahead if the underperformance in this quarter is an indicator of what’s to come,” Bank of America analysts led by Ron Epstein said.
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