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Investing.com -- Melrose (LON:MRON) Industries is prepared for gradual build rate acceleration at major aircraft manufacturers, according to feedback from RBC’s meeting with the company at the Paris Air Show.
The aerospace supplier maintains conservative projections through 2029, with management expressing more confidence in Boeing (NYSE:BA)’s production targets compared to Airbus.
The company reported that resolution of the powder metal issue affecting GTF engines is progressing as planned, with completion expected in 2027.
RBC noted the initial £200 million cost estimate is "likely comfortable," while management confirmed unchanged risk and revenue sharing partnership (RRSP) arrangements for the GTF Advantage program.
Melrose considers itself well-positioned for next-generation narrowbody engine programs, though these are not expected to enter service before the late 2030s.
The company currently holds 4-7% revenue share partnerships and, unlike competitor MTU, is not specifically targeting increased participation percentages in future programs.
Military aerospace represents significant growth potential for Melrose, with F-35 production supported by U.S. orders and international demand.
While the Swedish defense business may see a slight decline in 2025 after 74% growth in 2024, the company expects high demand levels to remain sustainable, supported by Sweden and other users including Czechia.
RBC observed that Melrose is transitioning toward more aerospace-focused metrics and governance, noting recent board additions with aerospace and defense experience.
The firm speculated that another similar addition might follow, along with a new management incentive scheme likely aligning with the cash focus of the business.
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