Nicholas Puri (PuriCassar)

Currencies, macro, commodities, short-term horizon
Nicholas Puri (PuriCassar)
Currencies, macro, commodities, short-term horizon
Contributor since: 2012
The company forecast presented at the analyst day is precisely what it is: a prediction. The figures presented there cannot be valued
more than actuals.
The key points of the analysis still hold. In fact:
- the announced decision of the company to steer their business from defence to other civilian businesses remains an intention as the
last data available (Q2 2012) still show the strong dependency on the defense business (measured in terms of operating profit) is
nowhere near being offset by income generated by other divisions. Let the numbers speak: the ops income coming from defense in the nine
months ended in Q2 is down to 174 mUSD from 472 mUSD, while the only segment growing (Access equipment) is up to 170 mUSD from 30 mUSD.
The total ops income is down to 257 mUSD from 427 mUSD. Net income is impacted too, down to 151 mUSD from 234 mUSD. There is a long way
to go before the defense income will be replaced.
- The success of the new strategy is dependent on a number of factors, including the likelihood of the budget sequestration. Shall that
occur, the entire economy will be affected and, likewise, the sector of durable goods. There the negative effect might be quite
substantial thus vanishing most of the assumptions the growth plan are based upon.
- The term diversification refers to the portfolio of technologies/expertise a company can count on. It should be evident their
capabilities are deeply rooted in the sole manufacture of vehicles. Serving different market segments of the same product (i.e.
vehicles) does not guarantee alternative sources of profits nor reduces the exposure to fluctuations of demand which, ultimately,
influence all segments alike.
Taking into consideration all the points above, the decision of becoming less dependent on the defense business is certainly correct
Whether it will turn out to be feasible, timely, and profitable is matter for discussion.
The company forecast presented at the analyst day is precisely what it is: a prediction. The figures presented there cannot be valued
more than actuals.
The key points of the analysis still hold. In fact:
- the announced decision of the company to steer their business from defence to other civilian businesses remains an intention as the
last data available (Q2 2012) still show the strong dependency on the defense business (measured in terms of operating profit) is
nowhere near being offset by income generated by other divisions. Let the numbers speak: the ops income coming from defense in the nine
months ended in Q2 is down to 174 mUSD from 472 mUSD, while the only segment growing (Access equipment) is up to 170 mUSD from 30 mUSD.
The total ops income is down to 257 mUSD from 427 mUSD. Net income is impacted too, down to 151 mUSD from 234 mUSD. There is a long way
to go before the defense income will be replaced.
- The success of the new strategy is dependent on a number of factors, including the likelihood of the budget sequestration. Shall that
occur, the entire economy will be affected and, likewise, the sector of durable goods. There the negative effect might be quite
substantial thus vanishing most of the assumptions the growth plan are based upon.
- The term diversification refers to the portfolio of technologies/expertise a company can count on. It should be evident their
capabilities are deeply rooted in the sole manufacture of vehicles. Serving different market segments of the same product (i.e.
vehicles) does not guarantee alternative sources of profits nor reduces the exposure to fluctuations of demand which, ultimately,
influence all segments alike.
Taking into consideration all the points above, the decision of becoming less dependent on the defense business is certainly correct.
Whether it will turn out to be feasible, timely, and profitable is matter for discussion
The company forecast presented at the analyst day is precisely what it is: a prediction. The figures presented there cannot be valued
more than actuals.
The key points of the analysis still hold. In fact:
- the announced decision of the company to steer their business from defence to other civilian businesses remains an intention as the
last data available (Q2 2012) still show the strong dependency on the defense business (measured in terms of operating profit) is
nowhere near being offset by income generated by other divisions. Let the numbers speak: the ops income coming from defense in the nine
months ended in Q2 is down to 174 mUSD from 472 mUSD, while the only segment growing (Access equipment) is up to 170 mUSD from 30 mUSD.
The total ops income is down to 257 mUSD from 427 mUSD. Net income is impacted too, down to 151 mUSD from 234 mUSD. There is a long way
to go before the defense income will be replaced.
- The success of the new strategy is dependent on a number of factors, including the likelihood of the budget sequestration. Shall that
occur, the entire economy will be affected and, likewise, the sector of durable goods. There the negative effect might be quite
substantial thus vanishing most of the assumptions the growth plan are based upon.
- The term diversification refers to the portfolio of technologies/expertise a company can count on. It should be evident their
capabilities are deeply rooted in the sole manufacture of vehicles. Serving different market segments of the same product (i.e.
vehicles) does not guarantee alternative sources of profits nor reduces the exposure to fluctuations of demand which, ultimately,
influence all segments alike.
Taking into consideration all the points above, the decision of becoming less dependent on the defense business is certainly correct.
Whether it will turn out to be feasible, timely, and profitable is matter for discussion.
Thank you for your comments. We actually have the assumption that Obama will win a second term.
As explained in the article, the reliance on defense far outweighs the rest of the business and accounts for most of the top and bottom line.
The fact there is a potential demand for military vehicles (assumption to be challenged in the light of the threat of budget sequestration and the likely trend of future military spending) does not imply OSK will (fully) benefit from it.
Despite the last years being favorable for military contractors:
- OSK did not pay any dividend for the past 2 years
- its credit rating is second-rate
- its stock underperformed the benchmarks picked by the company itself.
Although not at risk of default, it is not well positioned either to manage the future challenges and opportunities.
The defense budget is at its highest peak. It is reasonable to believe it will be decreased, also given the overall pressure to reduce the deficit of the US budget and the threat of sequestration (Fiscal Cliff related)