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Heroux-Devtek wins Boeing H-47 Chinook helicopter landing gear contract

MONTREAL - Heroux-Devtek Inc. has been awarded a five-year contract from Boeing to manufacture landing gear for the H-47 Chinook helicopter for the U.S. army.

Delivery of the landing gear for the medium- to heavy-lift helicopters are scheduled to begin in the first half of 2014 and be spread out over five years.

The U.S. army has contracted for 155 aircraft, but has options for an additional 150 helicopters.

Heroux-Devtek didn't provide a value for the contract but an industry analyst estimated it is worth about $40 million, or $8 million a year, which is three per cent of Heroux's overall annual sales.

It is the Quebec-based manufacturer's third H-47 contract in three years. The first contract in September 2009 involved fabrication, assembly, testing and delivery of the landing gear for H-47F aircraft delivered to customers outside the United States, including the CH-147 used by the Canadian Forces.

The second agreement, announced last September, was for a license to fabricate replacement parts and carry out repair and overhaul services for the landing gear of all Chinook variants.

Heroux-Devtek (TSX:HRX) CEO Gilles Labbe said the new contract reinforces Boeing's (NYSE:BA) confidence in the company's abilities to manufacture quality landing gear.

"This additional contract firmly positions Heroux-Devtek as the leading landing gear supplier on this important and longstanding program," he stated.

Cameron Doerksen of National Bank Financial said the contract is an important win for Heroux and probably represents three times as much revenue as the contract to non-U.S. landing gear.

"A key investor concern for Heroux-Devtek is the exposure to the military segment, but this contract win will help offset any weakness in existing military programs and also demonstrates the company's ability to grow its market share," he wrote in a report.

The commercial segment is a bigger driver for the company's growth, but Doerksen said the military segment's heavy focus on aftermarket activity means it shouldn't be a significant drag on growth.

The H-47F Chinook's primary mission is to move troops, artillery, ammunition and other equipment on the battlefield. It is also used for medical evacuation, disaster relief, search and rescue, aircraft recovery, fire fighting, parachute drops, heavy construction and civil development.

The aircraft type has been used by the U.S. army since 1962 and has been selected by nearly 20 other defence forces around the world.

Heroux-Devtek also said Monday that all investors who acquire its shares until markets close on Dec, 19 will be entitled to a special distribution that follows the company's sale of a large portion of its operations at the end of August.

The payment will consist of $2.70 per share consisting of a partial reduction and return of capital, and $2.30 per share in dividend.

On the Toronto Stock Exchange, Heroux's shares gained one cent at $12.79 in morning trading.


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