Huntington Ingalls Industries remains confident in its unmanned systems business despite the current uncertainty and delays in contracting for unmanned programs, company executives said Thursday during HII's fourth quarter 2021 earnings call.
Tom Stiehle, the company’s executive vice president and chief financial officer, said that HII believes unmanned will be a high growth area moving forward despite current delays.
“We did have some pressures on unmanned, although we feel positive about that business,” he said. “The budget is small right now, but we think that’s going to be a high-growth area on the Navy side of the business, as fast-growing as any account we have there.”
Chris Kastner, the company’s executive vice president and chief financial officer who is set to take over as president and CEO on March 1, said HII expects contract awards for small and medium unmanned programs will be awarded late this quarter or early next quarter, after the fiscal year 2022 budget is finalized.
Kastner said the company is making good progress on the Extra Large Unmanned Undersea Vehicle as the company has shipped its first modules to Boeing.
“It’s critically important that . . . Boeing gets that boat into the water to start demonstrating its capabilities,” he said. “So reasonable progress in unmanned and we’ll know a lot more this year.”
HII reported a total of $9.5 billion in revenues for 2021, an increase of 1.7% from 2020. The company’s fourth quarter 2021 revenue is $2.7 billion, down 2.9% from the fourth quarter of 2020.
The company expects shipbuilding operating margin to between 8% and 8.1% in 2022 and to continue to improve in 2023, according to Stiehle.
The company expects the first quarter of 2022 to be the weakest of the year with the shipbuilding operating margin near 7% and the technical solutions operating margin near 1%, Stiehle said. This is caused by the timing of shipbuilding program milestones and the seasonality of technical solutions, he added.
Stiehle said the company expects first-quarter 2022 shipbuilding revenue to be $100 million lower than first-quarter 2021.
“We expect that the first-quarter 2022 shipbuilding revenue will be the lightest of the year, given Omicron and the challenging labor market driving to a slow start of the year,” he said.
Mike Petters, HII’s president and CEO, said the company learned a lot while building the first-in-class aircraft carrier Gerald Ford (CVN-78), including about manning, design, supply chain and construction plans.
The Ford has experienced lengthy delays but is set to deploy by fall, according to the Navy.
Director of Operational Test and Evaluation Nickolas Guertin wrote in his FY-21 annual report that DOT&E continues to have significant concerns about the reliability underperformance of the Ford’s key systems, including the electromagnetic aircraft launch system, advanced arresting gear, advanced weapons elevators and dual band radar.
Petters said the company is using the lessons learned on Ford to improve the following carriers in the class, including the John F. Kennedy (CVN-79).
“We've taken all of the lessons that we've learned from Ford, we've invested against those lessons to drive success on Kennedy,” he said.
The next step is to start discussions with the Navy on CVN-82 and CVN-83, the next two carriers in the program that are not yet under contract, Petters said.
“We're through the growing pains now, and we're ready to accelerate into efficient production,” he said.