Space

RS-25 delays impact Aerojet earnings

WASHINGTON — Delays in starting production of RS-25 engines for NASA affected Aerojet Rocketdyne’s earnings in the second quarter, but the company expects to catch up on the program later this year.

The company reported Aug. 1 net sales of $528.5 million in the quarter ending June 30, with net income of $16.4 million. Both were lower than the same quarter of 2021, when the company reported net sales of $556.9 million and net income of $45 million.

A key factor in the reduced sales, company executives said during an earnings call, was ongoing delays in the production of new RS-25 engines. The company won a $1.79 billion contract from NASA in 2020 to produce a new expendable version of the engine for the Space Launch System. Those engines will be used after the current supply of refurbished shuttle-era RS-25 engines is used up on the first four SLS launches.

Eileen Drake, president and chief executive of Aerojet Rocketdyne, said on the call that production of the new RS-25 engines has been delayed by supply chain issues related to testing of the engines.

“Those delays are not related to lack of raw materials or components, but rather they’re related to delays in first article qualification testing as we continue to ramp up our supply chain again after several decades without any RS-25 production,” she said. She didn’t elaborate on the issue beyond issues with “first article inspections and starting up those programs again.”

Both Drake and Dan Boehle, Aerojet’s chief financial officer, said they were confident the issues with the RS-25 would be resolved soon. “For the second half of the year, large driver of those sales will be some of the catch-up on RS-25,” Boehle said.

“We’re working closely with our suppliers and we’re confident we’ll manage through these issues and see accelerated sales growth for the second half of the year,” Drake said.

Other space-related projects at Aerojet are going well, Drake said, emphasizing a record order for 116 RL10 engines that United Launch Alliance made in April for its Vulcan Centaur rocket, days after ULA announced an order of 38 Vulcan launches from Amazon for its Project Kuiper broadband constellation.

Aerojet did not disclose the value of the order, but the company’s backlog grew from $6.4 billion at the end of the first quarter to $6.9 billion at the end of the second quarter. Drake said in the increase in backlog was “in large part” due to the ULA order for RL10 engines.

The company has had a tumultuous year to date. In January, the Federal Trade Commission announced it would sue to block Aerojet’s acquisition by Lockheed Martin, announced in December 2020, on antitrust grounds. Lockheed terminated the $4.4 billion deal in February, with Aerojet remaining an independent company.

Since then, Aerojet had been tied up in a proxy fight between Drake and the company’s executive chairman, Warren Lichtenstein, who had differing views on the future of the company after the termination of the Lockheed deal. That culminated in shareholders voting for a new board of directors, approving July 6 a slate backed by Drake over a rival one backed by Lichtenstein.

The new board features Drake and seven others, including retired Air Force Gens. Kevin Chilton and Lance Lord, former NASA Administrator Charles Bolden and former Air Force Secretary Deborah Lee James. Drake said on the earnings call she was meeting with the new board for the first time later that day.

Lichtenstein’s Steel Partners still owns about 5% of Aerojet. “I don’t have a crystal ball, but I don’t see any impact” of Steel’s continued stake in the company, Drake said when asked about it on the call. “I think most of our shareholders realize the value of Aerojet Rocketdyne and the strength of this business.”

“I don’t know of any changes with that one shareholder,” she added, “but we’ll certainly let you know if something pops up.”

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