Astronics expects sales to grow

May 06, 2009 (The Buffalo News - McClatchy-Tribune Information Services via COMTEX) -- ATRO | Quote | Chart | News | PowerRating -- Peter Gundermann thinks Astronics Corp. will be in good shape once the recession ends.

He just doesn't know when that will happen, or how hard the downturn will end up hitting the East Aurora aircraft lighting and electronics manufacturer and its 285 local employees.

"It's hard to know what's going to happen in the next quarter, or two or three quarters from now, or how it's going to evolve in the next year or two," Gundermann, Astronics' president and chief executive officer, said after the company's annual shareholders meeting Tuesday.

It's clear, however, that the tide has taken a turn for the worse at Astronics, which had increased its sales by a nearly 50 percent annual pace over the last four years. Astronics still expects sales to grow this year by between 21 percent and 30 percent, but all of that increase will come from DME Corp., the aviation test and simulation equipment maker it acquired at the end of January.

Without DME, sales at Astronics' existing business is expected to slide by 13 percent to 22 percent as demand for the equipment the company makes for business jets drops markedly and demand from commercial aircraft makers weakens modestly.

"Astronics continues to struggle,"

said Alex P. Hamilton, an analyst at Jesup & Lamont, in a note to investors Tuesday. "Margins continue to be squeezed."

With Astronics' sales growth slowing to 24 percent in the first quarter, the company's profits tumbled by 47 percent. Astronics executives also trimmed their sales forecast for this year to between $210 million and $225 million, down from its earlier projection of $230 million to $245 million.

With the weak economy causing companies to cut back on spending, especially on big-ticket, discretionary items like business jets, Astronics' order flow plunged by 33 percent in the first quarter.

"The world has changed rather dramatically. It started for us in late 2008," Gundermann said. "It's been a free-fall for pretty much everyone in the business jet world. Companies are not spending money they don't have to spend these days."

Gundermann said he believes the slowdown was due to aircraft manufacturers adjusting their inventories as demand for new planes weakens. He's hopeful that order rates will rebound in the third and fourth quarters, after Astronics' customers work down their stockpiles. Yet in the longer term, Gundermann said he thinks Astronics is likely to emerge from the recession in good shape. The DME acquisition allows the company to branch out into a new segment of the aerospace market, and Astronics continues to make significant investments -- upwards of $25 million this year -- for engineering and development work on new products and technology that could lead to sales years from now.

So far, the company's military business has been stable, and its commercial jet sales also have been holding up fairly well, sliding by 4 percent in the first quarter.

"The important thing for us this year is to have the commercial transport market stay stable," Gundermann said. "It's half of our business. It has to stay stable."

drobinson@buffnews.com

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