Finmeccanica: US Contract Cancellation Won't Impact Results

Italian aerospace and defense group Finmeccanica SpA (FNC.MI) said late Monday that the possible cancellation of a U.S. contract for the VH-71 presidential helicopter program won't have an impact on the group's earnings.

In a filing to the Italian stock exchange Web site, the company added that since the value of the Increment 2 phase of the program was not included in Finmeccanica's budget nor in its multi-year plan, "there are no changes to the guidance provided to the market."

According to Italian news agency ANSA, U.S. Defense Secretary Robert Gates said earlier Monday he was proposing halting the presidential helicopter program in which AugustaWestland, a unit of Finmeccanica, was involved, together with Lockheed Martin (LMT), citing unsustainable costs.

In its statement, Finmeccanica referred to the proposal as "only the first step in a particularly complex budget approval."

It added, however, that the potential cancellation of the program would entitle Finmeccanica to receive a penalty payment for breaching the contract.

The company claims the potential cancellation of the program is in no way related to the technical features of the helicopter, nor to the platform costs, which it deems highly competitive.

The first phase of the program, Increment 1, has been already authorized by Congress and is worth $3.7 billion, $1 billion of which will go to Finmeccanica's unit AugustaWestland.

The contract, which runs until 2011, involves the development of nine helicopters, eight of which have already been delivered.

-By Enza Tedesco, Dow Jones Newswires; [e-mail]