The group led by Profumo closed with a profit up 83 percent compared to the previous year, at 510 million euros with a 4,3% growth, reaching 12,24 billion euros, thanks above all to the performance of Electronics, Defense and Security Systems and Helicopters.
"The 2018 represented an important step forward in the execution of the Business Plan: we took the necessary actions and kept the promises; we reached the targets and passed the Guidance - commented CEO Alessandro Profumo. We continue to be confident in achieving all the objectives of the business plan: top line growth together with strict cost control, for a double-digit Group profitability and an important cash generation from the 2020. In the coming years we want to further accelerate the path taken for sustainable growth".
Fabio Tamburini on Il Sole24Ore interviewed the managing director of Leonardo Alessandro Profumo.
Is a new Europe possible?
I am an incurable optimist and continue to consider the European challenge fundamental. Certainly changes are needed but, in the end, the road will be found and in the defense will allow to build a rational path that will allow to spend the citizens' money in the best way.
Do alliances with French, Germans and English risk jumping?
The opposite is true and two examples confirm this. The Anglo-Italian Tempest program and the Franco-German one, both in the hunt, I hope will converge. Likewise, in tanks, Leonardo has the credentials to work alongside the project started by Germany and France.
Do projects with China for a new plane call into question the historical relationship with Boeing?
I don't see any particular problems because the dialogue with the Americans is continuous.
If good relations with Boeing are the priority. Is the order book in line with the plan? At the beginning of the year we had given a forecast for 2018 of 12,5-13 billion euros. Then, in July, we raised it to 14-14,5 billion. Today the final balance was 15,1 billion. The dedicated facility built to revive the international market has worked well.
Some say that numbers benefit from a few large orders in Qatar, Kuwait, United States. Is that so?
All large companies also live on large orders, which are a source of satisfaction and pride. The contracts with Qatar, in particular, are worth 3 billion and the United States represents 28% of the total turnover, obtained however by adding rather fractioned operations.
Are you participating in tenders for other orders with such a high impact?
Replicating these contracts is difficult. In helicopters, the Qatar order was the highest in the company's history.
Are tensions in Europe creating difficulties for you?
All are widely overcome. In my previous managerial life, in Unicredit, I have always focused on transnational operations. And I'm doing it here too. Among the various countries there are different visions but, in the end, it is common interest to build a single strategy. In defense it is a necessary condition for achieving better and competitive results in the world.
Does the axis between Paris and Berlin on European integrated defense risk isolating Italy and disadvantaging you too?
No, even though Italy needs to have active policies with both France and Germany, and with the United Kingdom and Spain. Not only. Alliance systems must be built with the countries of central Europe.
France and Germany are studying the new European tank. Is Leonardo cut off?
It has not yet been decided who to entrust the project, an important project. We have expertise in electronics and tanks with Oto Melara. We'll see.
In the UK you are participating in the work for a new British fighter, the Tempest. At the same time, French and Germans have an alternative: the FCAS. What will Leonardo do?
How can you count considering that the Italian State has not provided any funds for the project? Tempest will be open to participation from other countries. I hope for convergence with the French and the Germans.
Was the transfer to the United States by the undersecretary to the presidency of the council, Giancarlo Giorgetti, useful to Leonardo?
Yes, in the defense market it is crucial to give visibility and support to the country system. For our part, Leonardo is an important instrument of international politics.
The American Drs confirmed itself difficult to integrate into the group. Have you decided to put it up for sale?
Quite the contrary. Drs allows us to participate in classified programs, for which particular guarantees must be given. In a market, that of the United States, which for us represents 28 per cent of total turnover. The company has been completely restructured and today it is moving towards a double-digit profitability. I don't know if it was in disposal. After my arrival, certainly not because I believed in it from the beginning.
Helicopters are a strength of the group. Do you think of concentrations with others or acquisitions?
Already today we are the leader in helicopters for civil use. We will continue to grow but internally, financing projects that can provide adequate satisfaction. An example is the Aw609 model, a fantastic object. The take-off remains vertical but travels horizontally like an airplane, above the clouds, at twice the speed of the helicopters.
Can helicopters cross paths with drones in the future?
Absolutely yes. Already today we have two models with remote guidance. In addition, the helicopter division is beginning to think about another fascinating project: the vertical take-off car. Drones are the future. And Leonardo participates in the European program with Germany, France and Spain.
Will Piaggio aerospace also be involved, which has an important project and of which Leonardo is a creditor for around 115 million? The credit is a totally separate game. How much does it weigh on the group's budget?
Nothing, because the credit has been totally devalued. Furthermore, we are interested in the engine maintenance part of Piaggio aerospace, which employs around 40% of employees and is fundamental for the Italian air force.
Relations with Boeing are very strong, especially in helicopters. Do you foresee repercussions from the accident in Ethiopia?
None. Boeing is and will remain a key partner. It is a company from which we have learned a great deal. The last example is the program that has been developed to improve the quality of suppliers. We, classified by them as the best supplier, are trying to replicate it with our suppliers.
With what results? Significant, even with regard to cost savings. How much have you cut so far?
At least 200 million and without squeezing the suppliers, but learning together to work better.
In the commercial aeronautics Leonardo will remain more tied to Boeing than to the Airbus?
We are one of the few European manufacturers working with both and will continue to do so. I would add that, by not setting limits to Providence, I am convinced that we will even improve our positions.
Your projects in China for the new Comac aircraft (Cer-929) are not particularly pleasing to Americans. With what consequences?
I exclude any conflict with Boeing that remains a key partner for us but, to tell the truth, I don't see any particular problems.
Does the defeat in the American race for trainer airplanes reduce the prospects for the M-346? Are orders for this aircraft in short supply?
We have not won, but obtained adequate satisfactions that leave us hopeful. The race included two components: quality and price. On the first front we placed ourselves at the same level as Boeing. Then, under certain values we could not go because it would have meant generating significant losses. The M-346 is a training aircraft for excellent military pilots and we are organizing, along with the Italian air force, one of the best in the world, to sell training services such as Ifts (International flight training school), in Italy. A project in which we believe a lot.
Are they possible, and under what conditions, closer agreements with Fincantieri?
Fincantieri, which has made an exceptional growth path, produces ships. We do a different job. Thanks to the agreement on Orizzonti naval systems we have taken a great step forward, but we will remain two separate companies that work together.
How is the negotiation with the French Naval proceeding for a joint venture in light torpedoes?
The path is very clear even if, at this moment, we are waiting for the results of the comparison within the French world on the choices in sensors. We will see.
Do you confirm that you will stay out of the Alitalia rescue?
I do not see any strategic significance justifying any investment. Do you like the production of the group more in the defense or in the civil? The two activities are inseparable. Both because the military technologies are decisive for the evolution of the civil industry, and because the profitability of the defense serves to finance the rest.
Leonardo is very diverse. Are other rationalizations planned?
The rich and well-structured portfolio focuses on three activities: helicopters, aircraft, defense electronics. We will continue like this. Of course, over time, we will have to understand how to strengthen ourselves even more.
The other global companies in the sector are at least twice as many as Leonardo. How do you plan to face competition from Airbus, Lockheed Martin, Thales?
The size factor is fundamental in the individual sectors, not considering the holding company. And in the individual sectors we have global leadership.
From the maxi privatization of Finmeccanica in June 2000 the stock has lost over 68 per cent. When she took office in May, 2017 was quoting 15,52 euro while today she is at 8,648 euro, with a loss of more than 40 per cent. Do the shareholders have any hope?
I bought 100 thousand shares at 9,73 euro and I am absolutely convinced that I have made a good investment. We are working to do what the market expects: to avoid negative surprises and generate a significant amount of cash. I believe it. The group's management has changed profoundly.
Would you do such a radical spoiling system?
I think I did the good of the shareholders by valuing managers inside and outside the group such as Bill Lynn (led by Leonardo Drs), Gian Piero Cutillo (helicopters), Valerio Cioffi (aircraft). Lorenzo Mariani (commercial area), Raffaella Luglini (external relations), Simonetta Iarlori (human resources). I didn't know everyone except one. In some cases they thought I was a bit crazy, but the results are proving me right.
You, just appointed, judged the dismantling of the product companies decided by your predecessor as positive and the transformation into simple divisions of the holding company. Is it still of the same opinion?
Absolutely yes, because supporting shared functions made it possible to give added value to the various activities to do better. Today, after giving substance to the holding, we have created a great matrix concentrating the commercial area, relationship with suppliers, communication, governance.
The summit of the group has changed a lot in recent years. Do you risk instability?
A managerial structure must move with a long-term horizon and that is exactly what we are doing. Here we work thinking Leonardo among the years. It is up to other parties to decide on top appointments. The choices are made by the shareholders.
One of the main competitors, the French Thales, has focused its strategy on digital. Do you share this choice? Will Leonardo do it too?
All our activity is digital-centered. Maybe we don't advertise specific programs, but digital is the basis of every initiative.
Apparently the Profumo care did really well for Leonardo. The hope is, however, that at European level truly inclusive projects will be realized in order to compete with the world giants. The road is that of the Italian-French Fincantieri-Stx France partnership. The tendency to work on common but distant projects such as the FCAS and the Tempest are not encouraging to sprout the idea of a common European defense industrial policy.