.Force Protection Sales May Jump Amid Afghanistan Push
Aug. 14 (Bloomberg) -- Force Protection Inc., the third- largest maker of blast-resistant trucks for the U.S. military, said annual sales of vehicle repair and maintenance services may be double what the company had projected in the next five years as President Barack Obama expands operations in Afghanistan.
About 2,000 of the company’s Cougar trucks that are being shifted from Iraq to Afghanistan will need spares, repairs and upgrades, Chief Financial Officer Charles Mathis said today in an interview in Boston. Over five years, such work may add about $1 billion in new sales, he said. That would lift annual service revenue to $450 million, from the $250 million the company had previously projected for such support work, he said.
Obama has made combating a resurgent Taliban in Afghanistan a top priority and earlier this year announced he was adding 17,000 troops there. The additional forces need vehicles to protect them from roadside bombs, and Force Protection is expanding services sales for its existing fleet. The company lost the contest in June for a new type of truck called the Mine-Resistant, Ambush-Protected, All-Terrain Vehicle, or M-ATV.
“The M-ATV competition we knew would be intense,” Mathis, 49, said in the interview. “We did everything we could to try to win the competition but our business model and business plan did not depend on winning M-ATV. We believe we have a very good future in the survivability-solutions arena.”
Buffalo Vehicles
In addition to supporting the mine-resistant Cougar trucks, Force Protection is also hoping to win support work on the company’s Buffalo vehicles in Iraq and Afghanistan that currently is provided by other suppliers, Mathis said.
Winning the volume of maintenance business Mathis described would exceed the forecasts of most analysts and investors, said James McIlree, a New York-based analyst with Collins Stewart LLC, who rates the shares “hold” and doesn’t own any. McIlree said he had forecast service sales to drop to $370 million next year from an estimate of $450 million this year. Collins Stewart buys and sells the securities for clients.
“The model I built assumed the level of business for spares and maintenance of Cougars would diminish as we withdrew from Iraq,” McIlree said in an interview today. “What’s been happening because the Marines are taking Cougars and moving them to Afghanistan is that revenue stream to maintain those vehicles has moved to Afghanistan. The company has opportunities to retain the spares business but it comes from a different geography.”
Share Performance
Force Protection rose 17 cents, or 3.6 percent, to $4.85 at 4 p.m. in Nasdaq Stock Market composite trading. The largest makers of MRAP trucks, by volume of vehicles delivered, are Warrenville, Illinois-based Navistar International Corp. and BAE Systems Plc in London. Both companies also bid unsuccessfully for the M-ATV order, which was won by Oshkosh Corp.
Mathis said he came to Boston to meet with investors and discuss the company’s outlook in the wake of the M-ATV loss.
“A lot of investors want to know where the long-term revenue is,” Mathis said. “We think there is $1 billion of incremental business here in upgrades, enhancement service and support opportunities over the next five years.”
Bloomberg
About 2,000 of the company’s Cougar trucks that are being shifted from Iraq to Afghanistan will need spares, repairs and upgrades, Chief Financial Officer Charles Mathis said today in an interview in Boston. Over five years, such work may add about $1 billion in new sales, he said. That would lift annual service revenue to $450 million, from the $250 million the company had previously projected for such support work, he said.
Obama has made combating a resurgent Taliban in Afghanistan a top priority and earlier this year announced he was adding 17,000 troops there. The additional forces need vehicles to protect them from roadside bombs, and Force Protection is expanding services sales for its existing fleet. The company lost the contest in June for a new type of truck called the Mine-Resistant, Ambush-Protected, All-Terrain Vehicle, or M-ATV.
“The M-ATV competition we knew would be intense,” Mathis, 49, said in the interview. “We did everything we could to try to win the competition but our business model and business plan did not depend on winning M-ATV. We believe we have a very good future in the survivability-solutions arena.”
Buffalo Vehicles
In addition to supporting the mine-resistant Cougar trucks, Force Protection is also hoping to win support work on the company’s Buffalo vehicles in Iraq and Afghanistan that currently is provided by other suppliers, Mathis said.
Winning the volume of maintenance business Mathis described would exceed the forecasts of most analysts and investors, said James McIlree, a New York-based analyst with Collins Stewart LLC, who rates the shares “hold” and doesn’t own any. McIlree said he had forecast service sales to drop to $370 million next year from an estimate of $450 million this year. Collins Stewart buys and sells the securities for clients.
“The model I built assumed the level of business for spares and maintenance of Cougars would diminish as we withdrew from Iraq,” McIlree said in an interview today. “What’s been happening because the Marines are taking Cougars and moving them to Afghanistan is that revenue stream to maintain those vehicles has moved to Afghanistan. The company has opportunities to retain the spares business but it comes from a different geography.”
Share Performance
Force Protection rose 17 cents, or 3.6 percent, to $4.85 at 4 p.m. in Nasdaq Stock Market composite trading. The largest makers of MRAP trucks, by volume of vehicles delivered, are Warrenville, Illinois-based Navistar International Corp. and BAE Systems Plc in London. Both companies also bid unsuccessfully for the M-ATV order, which was won by Oshkosh Corp.
Mathis said he came to Boston to meet with investors and discuss the company’s outlook in the wake of the M-ATV loss.
“A lot of investors want to know where the long-term revenue is,” Mathis said. “We think there is $1 billion of incremental business here in upgrades, enhancement service and support opportunities over the next five years.”
Bloomberg
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