EADS profit rises
European Aeronautic, Defence & Space Co., the owner of Airbus SAS, posted a 69 percent rise in second-quarter earnings as it delivered more planes and said 2009 deliveries will at least match the year-ago level.
Earnings before interest, taxes, depreciation, amortization and exceptionals rose to 656 million euros ($936 million), EADS said today in a statement. Free cash flow advanced 20 percent to 1.17 billion euros in the first half as airline buyers made “limited” demands for financing help.
Airbus, which contributes two-thirds of revenue at Paris- and Munich-based EADS, handed over more planes even as the airline industry suffers billions of dollars in losses because the global recession is sapping travel demand. The planemaker delivered 138 aircraft in the quarter compared with 116 a year earlier and intends to deliver at least as many planes in 2009 as in 2008, when it shipped 483.
“I simply did not expect them to be hanging on to the cash like this,” said Sandy Morris, an analyst at ABN Amro in London who recommends buying EADS shares. “The second-quarter performance is particularly good, and they raised free-cash-flow guidance a bit.”
EADS rose as much as 84 cents, or 6.6 percent, to 13.55 euros and was up 4.9 percent at 10:06 a.m., extending the stock’s gain in the last 12 months to 12 percent. Chicago-based Boeing Co., EADS’s only competitor in making the largest airliners, has declined 30 percent in a year.
A400M Negotiations
Yan Derocles, an analyst at Oddo Securities, said cash generation was better than expected. The Paris-based analyst said he was disappointed not to have more information about negotiations on the A400M, given that defense ministers for the seven countries that ordered the plane met a week ago to discuss the project.
Delays in building the A400M led to 715 million euros in costs in last year’s second quarter, and 191 million euros in the first six months. The model is four years behind schedule.
EADS said today it welcomed the commitment of A400M customers to the program and is “continuing to work hard” to bring the plane back on track. The order from the seven governments is valued at 20 billion euros.
The planemaker said the outlook for airline orders is more fragile.
“There is no clear sign of stabilization since traffic and yield deterioration as well as funding conditions are challenging airlines’ financials,” the manufacturer said.
Plane Financing
Airbus had pledged as much as 1 billion euros in customer financing to help carriers buy planes. EADS said that while the group’s order book still shows overbooking for coming years, it will be prudent in making forecasts given declining traffic at most airlines.
The International Air Transport Association forecast in June that deliveries by Airbus and Boeing may drop by as much as 30 percent in 2010.
The company said today that 2009 handovers will at least match last year’s. Airbus Chief Operating Officer John Leahy said last month that 2009 plane deliveries will be “flat.”
“We’re 18 months into the credit crunch, nine months into the financial crisis, and I might have thought it feasible that deliveries would drop like a stone,” ABN Amro’s Morris said. “It could be that they come down 10, even 20 percent. But for a 13 euro share price that’s not bad news.”
Net income for the second quarter increased 76 percent to 208 million euros from 118 million euros. Sales rose 19 percent to 11.7 billion euros.
A380 Costs
Airbus scaled back its full-year schedule for the 525-seat A380 superjumbo in May, saying it will deliver 14 of the double- decker airliners in 2009 instead of the 18 that were planned. Airbus today said A380 costs are “still higher than expected.”
Governments buying the A400M granted Airbus on July 24 an extension through December to renegotiate. EADS today said it aims to reduce further loss on the program, adding that the full financial consequences won’t be known until negotiations are complete. That’s expected by the end of the year.
The seven countries that placed the order for the A400M turboprop in 2003 had the right to drop the contract in April 2009 if the model hadn’t made its first test flight. Officials granted a three-month moratorium on any decision before extending it to the end of the year.
Airbus now plans the A400M’s first flight for December in Seville, Spain, where the model is being assembled. The manufacturer is spending 100 million euros a month on modifications and testing to fix engineering glitches, including engine-design flaws, that led to delays.
Money Spent
Advance payments of 5.7 billion euros have been spent, EADS Chief Executive Officer Louis Gallois said June 14.
The U.K., France and Germany are among the countries with a combined 180 A400Ms on order.
For the first half, earnings before interest and tax, goodwill impairment and exceptionals, came to 888 million euros, down 23 percent from 1.16 billion euros. Sales in the period rose 2 percent to 20.2 billion euros while net income fell 6 percent to 378 million euros from 403 million euros.
