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Boeing to revise full-year profit forecast over $536-mn after-tax charge

18 July 2015

Boeing Co would revise its full-year profit forecast due to a $536 million after-tax charge from higher costs to develop a new US Air Force refueling tanker.

The company would release a new projection for 2015 earnings per share on 22 July, with second-quarter financial results, Boeing said in a statement released on Friday. The company had given a range of $8.20 to $8.40 for annual earnings per share, excluding pension expense.

The charge comes as the second in the past year related to the KC-46, after a $272 million after-taxes expense for cost overruns in July 2014. Boeing said it would stick to the original schedule of delivering 18 tankers to the Air Force by August 2017 and building 179 by 2027. The company projected an annual $80 billion global market for refueling aircraft.

"Here we are a year later," Robert Stallard, an RBC Capital Markets analyst, said in a note to clients. "This is yet another reminder of how financially perilous it is" for contractors to take on the development of defence projects at a fixed price.

According to Boeing, revenue and cash forecasts for the year would remain unchanged.

Boeing said the charge, which would amount to 77 cents a share, would result in lower earnings for the full year. The added funds were needed to cover higher costs for development even as it kept the $49 billion aircraft programme on track for initial deliveries in 2017, the company said.

This comes as the second charge Boeing had taken on the KC-46, one of its biggest military development efforts, bringing total after-tax charges to just over $800 million.

According to Boeing, it would adjust its earnings per share outlook when it reported results on Wednesday, but its outlook for revenue and cash flow would not change. Company spokesman Bernard Choi said the tanker investment would have a cash impact this year, but Boeing would ''make up for it in other ways'' to maintain its full-year cash outlook.

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