The future is "bright forSikorsky," says the CEO of the rotorcraft maker’s parent company, United Technologies Corp. (UTC) – but it is not bright enough to keep it inside UTC.
With an adjusted operating margin of 10-13% for 2014, Sikorsky is "just a little, not quite as attractive as the rest of the businesses," according to UTC CEO and President Gregory Hayes. Other operating units inside UTC – namely Pratt & Whitney (P&W), UT Aerospace Systems (UTAS), Otis Elevator and Climate, Controls & Security (CCS) – returned at least 15%.
Also, Hayes said, Sikorsky is a platform-oriented provider dependent on its King Kong-like customer, the Pentagon; both are factors that make squeezing out higher margins more difficult for a conglomerate like UTC compared with commercially oriented systems providers like P&W, UTAS, OTIS and CCS. Defense industry profit growth is seen in low single digits versus mid/high single digits elsewhere in UTC, and Sikorsky’s cash flow is "investment dependent" versus other units where net income can exceed corporate investment.
Hayes spoke March 12 to Wall Street analysts in a webcast event to explain UTC’s decision, announced the night before, to consider spinning off Sikorsky tax-free.