Business

Wednesday November 18, 2009

EADS core profit down 77%


PARIS: EADS unveiled a 77% drop in third-quarter core profit on Monday, hurt by the downturn in civil aviation, the weak dollar and delays to its A400M programme.

Core earnings of 201 million euros (US$301mil) beat forecasts but Europe’s largest aerospace group passed on full-year guidance, citing uncertainty over the impact of delays to the A400M and A380 programmes on the fourth quarter.

“The company’s cash performance is fabulous; they deserve an enormous amount of credit for that,” said RBS analyst Sandy Morris. Net cash stood at 8.1 billion euros at the end of the third quarter, unchanged since the end of the first half.

But the group would be facing a “big currency headwind” in 2010, Morris warned, and the market may not have taken on-board the likely impact of the weakening dollar next year.

The Airbus A400M military transport plane. — AFP

“It is indeed probably one of our biggest headaches today – the level of the euro/dollar,” chief financial officer Hans Peter Ring told a conference call.

EADS, which traditionally prices in dollars, said the weakening of the greenback was “challenging” its performance “because of a weakening hedge book over time” but the currency issue was not a short-term threat.

EADS chief executive Louis Gallois told France 24 TV: “We have to face facts: one euro at US$1.50 is a very big difficulty for the European aerospace industry. The consequence is obviously that we carry out cost-cutting plans.

“If it continues, there is also pressure to outsource production.”

EADS said oil price increases and the wider economic environment affected commercial aircraft customers but that it was “cautiously envisaging” an improvement of economic and market conditions in the next months.

Many airlines have been forced to ground planes and cancel or defer aircraft orders to cope with high oil prices in tandem with a global downturn that has reduced demand for travel.

EADS maintained its estimate of up to 300 gross aircraft orders in 2009 and said it expected to deliver around 490 aircraft this year.

Emirates airline said at the Dubai Airshow it was in talks with Airbus and US rival Boeing to buy “tens of planes”, possibly 777s and A330s as it prepared for the global recovery.

Earnings before interest and taxes (EBIT) before one-offs, which EADS says gives an underlying flavour of the business, was 381 million euros in the third quarter, compared with a forecast of 296 million. It said EBIT before one-offs should be around two billion in the full year.

EBIT for the first nine months was 1.089 billion euros, around half the result last year, hit by currency change.

Group revenue slid 2% to 9.528 billion euros in the third quarter, and the group posted a net loss of 87 million. — Reuters


Latest business news from AP-Wire

  • E-mail this story
  • Print this story