July 26 (Bloomberg) -- Dassault Aviation SA, the maker of Rafale fighter planes and Falcon business jets, posted a 91 percent jump in first-half profit on higher deliveries of corporate aircraft.
Net income, excluding Dassault’s holding in Thales SA, rose to 179 million euros ($220 million) from 94 million euros in the year-earlier period, the French company said in a statement. Including the stake, net income rose 74 percent to 223 million euros. Sales increased 46 percent to 1.93 billion euros from 1.3 billion euros.
Dassault, based in Saint Cloud, a suburb of Paris, has relied increasingly on corporate jets for earnings in recent years as military sales have slowed amid its failure to secure export customers for Rafales. Dassault delivered 34 Falcons in the first half, up from 19 in the year-earlier period.
“It was a decent set of results, driven by deliveries of the Falcon,” said Yan Derocles, an analyst at Oddo Securities in Paris. Better coverage on the dollar, with a hedge rate of $1.24 to the euro versus $1.28 in the year-ago period also helped, Derocles said. Business jets are sold in dollars.
While demand for business jets has been slow to recover following a slump in demand after 2008, Chief Executive Officer Charles Edelstenne said within the last two months Dassault began seeing signs of interest from the U.S., its biggest market, and from Europe.
Demand may pick up further after the U.S. presidential election, he said, adding that the Gulf region remains sluggish.
“China is one of the countries where things are better,” he said. Dassault has 13 Falcons flying in that market and expects to double that number this year, he said.
He declined to estimate how many Falcon business jets China might have in five years, while saying the market has “big potential” and may in the medium term be “at least a third to a half” the size of the U.S. market.
Dassault fell 0.9 percent at 1:20 p.m. in Paris to 691.58 euros.
In the military market, Dassault earlier this year was chosen as the exclusive bidder to supply India with 60 fighter jets, although it must successfully negotiate price and terms before it can declare victory on the contract.
France, which has ordered 180 Rafale planes, so far had been left to pay the full production costs for the plane after the fighter was rejected by countries including Singapore, South Korea, Morocco and Switzerland.
France has committed to take delivery of 11 a year in order to keep the production line running, although Europe’s economic crisis is weighing on the French budget, Edelstenne said.
Assuming Dassault clinches the India order, that would allow the French state to ease off on deliveries, he said. Dassault has delivered 108 Rafales to France so far.
The first delivery to India, if the contract goes through, would be in three years, Edelstenne said today. The French government would likely take advantage of that to reduce its own deliveries to save money, he said.
The French state in recent years has accounted for about 20 percent of Dassault’s revenue.
“That will drop to 10 percent,” he said, as deliveries fall and also as corporate jets account for a bigger part of overall deliveries.
The number of Rafales sold in the first half fell to four from six in the year-earlier period. Dassault said it expects to deliver 65 Falcons and 11 Rafales this year. It sold a record 95 business jets in 2010.
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