Bad news overshadows good for EADS results

16th May 2006, Comments 0 comments

PARIS, May 16, 2006 (AFP) - Shares in European aerospace and defence group EADS fell Tuesday as investors overlooked higher-than-expected net profit in the first quarter to focus on a recent run of bad news for the company.

PARIS, May 16, 2006 (AFP) - Shares in European aerospace and defence group EADS fell Tuesday as investors overlooked higher-than-expected net profit in the first quarter to focus on a recent run of bad news for the company.

In midmorning trading, shares in the company showed a loss of 2.42 percent to EUR 28.65 after rising 1.70 percent in early deals.

"The flow of news that has been building up for a while now is not good for it," said a trader in Paris, who asked not to be identified.

He pointed to reports that Airbus, an 80-percent owned subsidiary of EADS, was revamping its new twin-engined A350 long-distance airliner because of scepticism about the model in the market.

The redesign is expected to double the cost of the A350 project to EUR 8 billion, according to sources contacted by AFP.

The fall in the dollar also weighed on EADS shares, and lower orders for Airbus compared with US rival Boeing since the beginning of the year was another factor, dealers said.

Furthermore, EADS had announced on Friday that a loss-making plant operated by subsidiary Sogerma in France would be definitively closed, with the loss of an estimated 1,000 jobs.

The decision by Sogerma, which offers services and support to commercial and military plane operators, was condemned by trade unions and French Prime Minister Dominique de Villepin expressed his concern about the closure.

Analysts were upbeat about the company's results, however.

"EADS has just announced very good results for the first quarter of 2006. The figures are clearly better than the consensus expectations and our own estimates," commented an analyst at WestLB.

"Even as they released these results, the group confirmed its forecasts for the entire year," he said.

An aerospace analyst at Aurel Leven in Paris, Harald Liberge-Dondooux, said that the EADS forecasts "remain favourably orientated".

Analysts agreed that results from European aircraft maker Airbus pushed overall performance beyond expectations.

"Once again, the revenue and the margins of Airbus were the main contributors to the surprise," said an analyst at JPMorgan.

EADS reported a net profit of EUR 516 million in the first quarter, an increase of 26 percent.

For 2006, EADS has forecast operating profit of EUR 3.2-3.4 billion on revenue of more than EUR 37 billion "despite the negative impact of the dollar and greater-than-expected losses by Sogerma".

Copyright AFP

Subject: French news

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