Airbus Parent EADS Profit Jumps 89% Even With A350 Costs
European Aeronautic, Defence & Space Co. (EAD) almost doubled first-half profit and lifted its full-year forecast as the Airbus SAS unit increased plane production and prices after racking up a record backlog.
Europe’s No. 1 aerospace and defense company rose as much as 8 percent in Paris after saying earnings before interest and tax jumped to 1.4 billion euros ($1.7 billion) from 723 million euros a year earlier, excluding one-time charges and currency movements. Revenue added 14 percent to almost 25 billion euros.
“These are good figures, driven by Airbus deliveries and pricing and also by Eurocopter, where margins are impressive,” said Yan Derocles, an analyst at Oddo Securities in Paris who had forecast a comparable Ebit figure of 1.1 billion euros.
EADS lifted its estimate for full-year earnings from at least 2.5 billion euros to 2.7 billion euros, even after posting a charge of 124 million euros against a three-month delay to the A350 wide-body airliner. Derocles said the one-time cost and another booked against fixing wing cracks on the A380 superjumbo are in line with analyst forecasts.
Shares of EADS closed 5.6 percent higher at 29.81 euros, the sharpest gain since March 8, after earlier reaching 30.50 euros. They’ve added 23 percent this year, valuing the company at 25 billion euros. Boeing Co. (BA) had gained 2.7 percent for the year as of 12:41 p.m. in New York for a value of $57 million.
Airbus, which generates about two-third of group revenue, should deliver 580 aircraft this year, 10 more than previously projected, with order intake outpacing handovers, EADS said.
“Our key programs, particularly at Airbus, continue to command our utmost attention,” said Chief Executive Officer Tom Enders, presenting his first results as head of Toulouse, France-based EADS. “On A350 especially, maturity of sections delivered to the final assembly is of key importance to us as we prepare for a robust production ramp-up.”
The delay to the A350, which stems from problems in building the composite wings, means service entry will slip to the second half of 2014. Drilling that was due to be automated is still being done by hand and the program is “challenging,” EADS said, with further delays likely to prompt more charges.
“We are not meeting the expectations or plans we had,” Enders said. “Can I be absolutely confident that we will not have further delays? Absolutely not.”
Assembly of the first A350 to fly will start in October, with the plane taking to the air in June or July next year.
EADS booked a 23 million-euro second-quarter charge to cover the cost of fixing a wing fault on the flagship A380. That leaves an expense of about 80 million euros to be taken in the second half out of a total of 260 million euros previously announced for the full year.
Harald Wilhelm, the company’s chief financial officer, said a final charge of 50 million euros is likely to booked in 2013 and that the project should still turn profitable in 2015.
While Airbus will deliver 30 A380 double-deckers this year, the number will fall below that level in 2013 as the planemaker introduces the wing fix, before recovering to between 30 and 40 in aircraft 2014 and 2015, Enders said.
Airbus expects approval from certification authorities “in the next months” for measures to be applied to existing A380s. Superjumbos delivered starting in 2014 will not need modifying as design changes are being introduced in production.
Enders said the wing situation is impacting A380 orders and that the model may not reach the 2012 target of 30 new bookings.
“That wing crack problem, I think, certainly has an effect on the orders,” he said, adding that economic conditions mean “this is not a great time for ordering very large aircraft.”
Airbus’s A400M military transport will reach operational capability later than planned after certification testing was halted this month, Enders said, blaming “reliability issues” with turboprop engines built by Rolls-Royce Holdings Plc (RR/), MTU Aero Engines Holding AG (MTX), Safran SA (SAF), and Spain’s ITP.
EADS still expects the maiden delivery to the French air force in the first quarter next year, as contracted, he said.
First-half net income rose to 594 million euros, or 73 cents a share, from 109 million euros, or 13 cents, a year earlier, the company said. Six analysts surveyed by Bloomberg News had estimated a figure of 497 million euros.
Annual earnings should now amount to 1.95 euros a share, excluding items, versus previous guidance of more than 1.85 euros. EADS raised its full-year earning guidance two days after Chicago-based Boeing boosted its full-year profit forecast.
Adjusted first-half Ebit rose at every division except the Cassidian defense business, which recorded a 1 percent decline.
At the Eurocopter unit, sales increased 28 percent with only two order cancellations, indicating the helicopter market is “back to the pre-crisis level,” Enders said, though Portugal has indicated it may cancel an order for 10 NH90 transports.
Revenue at the Astrium space business increased 13 percent and orders advanced 29 percent. EADS said it favors an upgrade of the Ariane 5 launcher rather than an all-new Ariane 6 as the European Space Agency evaluates future rocket development.
“It is a very pragmatic step to keep up the competitiveness of the Ariane launcher for the next 10 to 15 years,” Enders said. “It’s the only sensible thing, given budget constraints.”
The European company, which is interested in acquisitions and has some under consideration, according to the CEO, is benefitting from currency fluctuations after the euro slumped to $1.21 on July 24 from a 2012 high of $1.35 in February.
Airbus books most of its sales in dollars and the bulk of costs in euros, though the immediate benefit of favorable movements is damped by currency hedges.
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