EADS Scraps Dividend After Reporting Loss on Delays (Update2)

March 9 (Bloomberg) -- European Aeronautic, Defence & Space Co. plans to scrap its annual dividend for the first time in the company’s 10-year history after cost overruns on its two largest Airbus SAS plane programs led to a loss.

The stock fell 2.8 percent today after EADS predicted earnings before interest and tax will reach 1 billion euros ($1.36 billion) this year, about 500 million short of analysts’ estimates. Revenue won’t increase, and EADS will deepen cost cuts as it seeks to lift some production rates.

“Their guidance for 2010 was low,” said Nick Cunningham, an analyst at Evolution Securities in London, adding he hadn’t expected the company to cancel its dividend. “And when you look into 2011, they’re not giving any guidance.”

The Airbus aircraft unit, which provides about two thirds of EADS’s sales, has been dogged by spiraling costs on the A400M military plane as well as the A380 superjumbo, with both projects years behind schedule. EADS said yesterday that it will abandon its bid for the U.S. Air Force’s $35 billion tanker program, saying the selection process favored Boeing Co.

EADS shares declined 45 cents to 15.44 euros. The stock has gained 9.6 percent this year, compared with a 26 percent increase in the value of Boeing shares.

Higher Production

The company posted a net loss of 763 million euros for 2009, after net income of 1.57 billion euros a year earlier. Analysts surveyed by Bloomberg predicted a loss of 375 million euros. Revenue fell 1.2 percent to 42.8 billion euros.

For 2010, EADS predicted that production rates of its wide- body planes will remain at about eight aircraft a month, while the rate of production on its best-selling single-aisle planes will rise to 36 a month from the end of this year.

Airbus reached an accord with governments involved in the A400M military plane last week, after threatening to walk away from the program. The agreement led EADS to book an additional 1.8 billion euros in charges on the project, on top of 2.4 billion euros taken previously.

“Thanks to the agreement between the customer nations and EADS this program is now back on track,” EADS Chief Executive Officer Louis Gallois said in the release. “Although the group has to take an additional significant provision, this stabilizes the program.”

Protecting Cash

The company had cash of 9.8 billion euros, and Gallois said today that cash protection will remain a main focus going forward, in order to help EADS protect its credit rating. EADS is rated A1 by Moody’s Investors Service, and BBB+ at Standard & Poor’s.

Northrop Grumman Corp., EADS’s partner in the U.S. Air Force’s tanker program, said it won’t bid, making good on its threat to withdraw from the contest unless the government altered some of its requirements. EADS needed a local partner to compete against Boeing in the program.

EADS booked 240 million euros in charges on its A380 superjumbo plane, which the company has said will remain unprofitable for several years. The company wants to deliver about 20 units this year, or twice as many as in 2010. So far, three A380 planes were shipped to customers this year.

EADS’s biggest shareholders include carmaker Daimler AG, the French state and Lagardere SCA. Over the years, Lagardere has whittled its holdings down to 7.5 percent, and Daimler has sold a 7.5 percent EADS stake to a group of German banks and states, while keeping voting control of those shares.

Daimler said in its annual report that resolution of the A400M dispute and additional charges may result in “a material negative effect” on earnings in the first quarter.

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