labels: Defence general, Airbus
EADS returns to profit with improved Airbus A380, A400M news
14 November 2008

European aerospace and defence giant European Aeronautic, Defence & Space Co. (EADS) returned to a profit in the third quarter on lower charges from its A400M military transport programme and increased deliveries of its A380 `Superjumbo', and also raised its 2008 profit forecast.

Shares rallied as much as 8 per cent today after the announcement of the results.

The group earned  679 million ($867 million) in the three months ended 30 September, despite a  341 million charge due to delays on the A400M. In the year earlier quarter, it lost  776 million on 1.4 billion charges related to the A400M. Revenue rose 6 per cent at 9.7 billion, on a 49 per cent pickup in military transport aircraft revenue and a 36 per cent rise in revenue from at EADS' Astrium space programme.

"The pressure on the A400M programme remains and we are conducting ambitious efforts to tackle both the industrial and commercial challenges in discussion with our customers and suppliers," EADS said.

On the outlook, EADS said it should exceed its forecast for earnings before interest and taxes, or EBIT, of 1.8 billion this year, as it's already earned 2 billion on that measure in the first nine months of the year. This forecast, however, excludes any additional impact from the 400M. The group still expects to capture 850 new orders and sales to exceed 40 billion.

The recent appreciation of the US dollar against the euro has helped boost third-quarter results, as most of the company's costs are in euros but its revenue is in dollars.

Airbus's third-quarter sales fell 2 per cent to 5.86 billion while the unit reported EBIT of 789 million compared with a year-earlier loss of 696 million. The division delivered 104 planes in the period versus 109 a year earlier.

Airbus, the world's biggest maker of commercial aircraft, has handed over nine double-decker A380s since late last year to customers, including Singapore Airlines Ltd and Dubai-based Emirates. Rival Boeing was hurt by an eight-week machinists' strike that halted manufacturing until early November. The Chicago-based company said yesterday that it must delay deliveries of its top-selling 737 model because of faulty parts.

EADS is Europe's second-biggest defence company, with Airbus contributing two-thirds of sales. That contrasts with London-based BAE Systems Plc, the region's largest defence contractor, where sales are driven by the US military market, and Rome-based Finmeccanica SpA, which draws a significant portion of revenue from military helicopter sales to the US and Britain, fighter jets and military transport planes.

EADS CEO Louis Gallois reassured investors that the group's strong financial position would allow it to weather the global economic downturn. ''EADS faces the impacts of the financial crisis in a position of strength. Our large and well-diversified order book covers deliveries for several years. A strong net cash position ensures stability while giving us flexibility to adapt to a changing economic environment," he said in a statement.

He, however, noted that lower oil prices and stronger dollar wouldn't be enough to offset the impact of a global economic downturn. "The slowdown in economic growth and the resulting strong decrease in air traffic have overshadowed the recovery of the US dollar versus the euro and the reduction in oil price since the summer," he said.

Meanwhile EADS is accelerating its restructuring program, known as Power8 Plus.

That programme aims to save one billion euros annually on EBIT across the group in 2011 and 2012. In addition EADS said Friday it's working on a further cost-saving plan, called "Future EADS" to save at least another 200 million in 2011 and 2012.


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EADS returns to profit with improved Airbus A380, A400M