EADS' outlines silver lining on profits drops

27th July 2006, Comments 0 comments

PARIS, July 27, 2006 (AFP) - EADS, struggling to pull out of crisis over delays with its Airbus A380 superjumbo airliner, warned on Thursday that its run of problems might hit profits this year but said that sales would rise.

PARIS, July 27, 2006 (AFP) - EADS, struggling to pull out of crisis over delays with its Airbus A380 superjumbo airliner, warned on Thursday that its run of problems might hit profits this year but said that sales would rise.

The group, the European Aeronatics Defence and Space Company, said that net profit in the first half had risen by five percent, that deliveries of Airbus had risen and that it expected sales to reach a record this year.

But the group also said that the results of a study into the overall implications of problems in production of the A380 superjumo airliner might reveal further extra costs.

EADS said that prospects for the whole of 2006 could be affected by the cost of adapting the A350 airliner and delays to the timetable for the A380.

The announcements were received without surprise on the stock market and the price of shares in the group, which controls Airbus, was showing a gain of 2.18 percent to 21.58 euros in mid afternoon trading.

The company cut its forecast for profit before writing down goodwill and exceptional items for 2006 to EUR 3.2 billion, the bottom of a previous range of EUR 3.2-3.4 billion.

The company, with a new management team, is trying to overcome criticism of the design of the A350, which it has now re-drawn, and delays to production and delivery of the superjumbo which hit its share price hard, damaged investor confidence in the group as a project manager, and sparked a management shuffle.

The crisis also raised concern about the quality of internal communications between production managers and the management board, and over the way the company communicated with customers and shareholders about possible problems.

EADS said that the latest forecasts took account of the financial implications of the delay to the A380 timetable.

But it also warned that by the end of the year, these forecasts might have to be changed again and that a study of the overall implications of problems in A380 production "could also lead to recognition of extra expenditure".

However, it also reported a first-half rise of 18 percent in sales, an increase in the number of aircraft delivered, and said it expected to make record deliveries in the whole of 2006.

The two chief managers at EADS, Tom Enders and his new French counterpart Louis Gallois said in a statement that they wanted to "overcome the immense challenge before us regarding the A380, the A350 and the US dollar".

Gallois said of the re-drawn A350: "We have received extremely positive responses from clients."

In the first half, net profit rose by five percent to EUR 1.04 billion.

Earnings before interest and tax (EBIT) rose by six percent from the equivalent figure last year to EUR 1.63 billion.

Sales rose by 18.0 percent to 18.98 billion euros, of which EUR 13.154 billion was generated by Airbus, an increase of 17 percent.

EADS also increased its expectations for sales of Airbus in 2006, saying it expected this to be a record of 430 aircraft.

In the first half of the year it delivered 219 aircraft, up from 189 in the same period of last year.

Copyright AFP

Subject: French news

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