Precision Castparts’ sales were flat in 2019 and the Portland company expects reduced demand for some products this year because one of its key customers, Boeing, has shut down production of its flagship 737 MAX line indefinitely.

In his annual letter to Berkshire Hathaway shareholders Saturday, Warren Buffett offered his most detailed look at Precision Castparts’ performance since his investment firm acquired the Portland company in 2016.

It’s a mediocre report card, indicating core parts of the business have been struggling and the company hasn’t grown meaningfully since its sale, despite the robust U.S. economy. Buffett indicated Precision Castparts suffered serious manufacturing setbacks during 2019.

The Oregonian/OregonLive reported earlier this month that Precision Castparts had laid off 150 employees in the Portland area because of the shutdown in 737 MAX production that began last month.

Precision Castparts makes heavy-duty metal components for airplanes, power generators and other industrial products. It was Oregon’s second-largest company at the time of its 2016 sale to Berkshire Hathaway and employs more than 33,000 worldwide.

The Portland company’s $37 billion sale represented the largest price ever paid for an Oregon company, and it’s the biggest deal in Berkshire Hathaway’s history.

Buffett said Precision Castparts’ sales totaled $10.3 billion in 2019, up just 0.7% from the prior year. The Portland company reported revenue of $10.0 billion in 2015, its last full year as an independent company.

Precision Castparts’ aerospace sales grew last year, Buffett said, but sales to power generation clients fell – the second straight year of decline. He said he expects that market to stabilize in 2020.

The Portland company experienced serious production problems last year, Buffett wrote. He said ramping up new aerospace programs “created manufacturing inefficiencies and slowed production cycles contributing to delays in product deliveries and sales.”

“Temporary unplanned shutdowns of certain metals facilities and metal press outages also negatively impacted earnings in 2018,” Buffett wrote.

Meeting aerospace customers’ demand and deadlines hurt profits amid the manufacturing setbacks, according to Buffett.

“The production headwinds experienced were primarily attributable to shortages of qualified skilled labor and the rapid increase in requirements for newer, complex aerospace products,” he wrote. Buffett said the Portland company is taking steps to address the issues but indicated they are eating into Precision Castparts’ profits.

Boeing stopped making the 737 MAX in January after two overseas crashes linked to software problems on the jet. The airplane manufacturer has been unable to demonstrate the airplane is safe to fly, and the jet has been grounded since March 2019.

The shutdown also has resulted in thousands of layoffs at other Boeing suppliers.

While the 737 MAX shutdown will reduce demand for some Precision Castparts products in 2020, Buffett said growth in other programs will offset “a significant portion” of that lost sales volume.

Precision Castparts did not respond Saturday to a request for additional information about its performance.

-- Mike Rogoway | mrogoway@oregonian.com | twitter: @rogoway | 503-294-7699

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