February 27, 2013 / 6:28 AM / 7 years ago

Airbus maker EADS happy to fly solo after profit leap

BERLIN (Reuters) - Airbus parent EADS formally buried its failed $45 billion (29 billion pounds) merger with defence contractor BAE Systems and cheered investors with evidence that civil aviation growth continues unabated.

Shares in Europe’s largest aerospace company hit a record high on Wednesday after it unveiled higher than expected 2012 earnings and raised its dividend despite charges at its defence and helicopter operations.

Chief Executive Tom Enders said he was “comfortable” with defence providing only 20-25 percent of overall group revenue, rather than the long-targeted equal split that would have resulted from a deal with Britain’s BAE.

Investors had largely opposed the deal because it would have diluted their exposure to strong demand from airlines in emerging markets - a rare bright spot in an otherwise bleak climate for industrial goods made in western economies.

Strategy chief Marwan Lahoud told Reuters that the BAE deal was now “off the table”, dismissing lingering speculation that EADS was still clinging to hopes of reviving the deal.

EADS, which makes drones, fighter jets and missiles, will study defence activities and potentially stop some of them if they fail to meet the group’s criteria, he said in an interview.

While defence spending has been hit hard by budget cuts, passenger jet production has largely ridden out the economic crisis thanks to airline growth in emerging markets.

BOUNCED BACK

Airbus has also bounced back strongly after last year’s discovery of cracks on the wings of its A380 superjumbo, with the spotlight falling instead on Boeing, which is wrestling with battery problems on its 787 Dreamliner.

EADS operating profit rose 68 percent to 3 billion euros in 2012 for an operating margin of 5.3 percent on revenue up 15 percent to 56.5 billion euros.

Net profit grew 19 percent to 1.2 billion.

For 2013 it targeted 3.5 billion euros in operating profit and earnings per share of 2.5 euros, up from 2.24 euros, before a planned share buyback linked to a shake-up of shareholdings.

EADS shares were up 7.4 percent at 37.45 euros by 1416 GMT, against a 0.5 percent rise for France’s blue-chip CAC 40 index.

The company said that it had largely absorbed the costs of repairing and preventing cracks on the A380, the world’s largest airliner. Any further potential one-off costs should be limited mainly to its next big project, the A350, which it continued to describe as “challenging”.

For now, it is sticking to plans to fly the A350 this summer. Europe’s rival to Boeing’s carbon-composite 787 was rolled off the assembly line in France on Tuesday for ground tests.

Airbus is looking at a second A350 assembly line but has yet to make a decision, Chief Financial Officer Harald Wilhelm said.

A man walks in front of a poster displaying an Airbus A400M airlifter before the EADS annual news conference in Berlin February 27, 2013. REUTERS/Fabrizio Bensch

A slowdown in A380 deliveries as Airbus switches to a permanent fix for cracked wing “rib feet” - which had shortened the anticipated life of parts but did not lead to the grounding of the aircraft - means that EADS is predicting only “moderate” 2013 sales growth.

OWNERSHIP SHAKE-UP

Investors have also responded positively to an unexpectedly sweeping reorganisation of the company’s complex public and private shareholdings, triggered by the collapse of the BAE deal.

France and Germany continue to own stakes, but a higher proportion of shares will be held by ordinary investors and the management says that it will be given a virtually free hand.

“The market is in a generous mood towards EADS,” said Agency Partners analyst Nick Cunningham. “It likes risky cyclicals now, and the (share) buyback adds about 15 percent to earnings in a full year. It is an earnings-driven equities market right now.”

The results came weeks after CEO Enders predicted a “very significant improvement” in revenue and operating profit, but on Wednesday he restated the need to boost profitability.

EADS is targeting an operating margin of 10 percent in 2015, broadly on a par with Boeing, which has long outstripped Airbus in profitability - blurred by accounting differences that allow it to defer the impact of heavy 787 development spending.

Boeing recently posted fourth-quarter results above expectations, thanks largely to its ability to speed up jet production and keep down costs.

Analysts had forecast EADS revenues of 54.88 billion euros and net income of 1.475 billion, according to consensus data.

Slideshow (2 Images)

A traditional end-of-year slew of cash from European government customers, which tend to pay in the fourth quarter, reversed an unexpected hole in EADS cashflow in the third quarter, with annual free cashflow before acquisitions at 1.4 billion euros.

EADS aims for underlying cashflow breakeven in 2013.

Editing by James Regan and David Goodman

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below