EADS shares dip on disappointing forecast

13th December 2004, Comments 0 comments

PARIS, Dec 13 (AFP) - Shares in the European Aeronautic Defence and Space Company fell sharply here Monday as investors reacted negatively to 2005 profit projections 10 to 15 percent below broker estimates and to expected cost overruns on the giant Airbus A380.

PARIS, Dec 13 (AFP) - Shares in the European Aeronautic Defence and Space Company fell sharply here Monday as investors reacted negatively to 2005 profit projections 10 to 15 percent below broker estimates and to expected cost overruns on the giant Airbus A380.

EADS shares dropped 3.99 percent to close at EUR 22.15 in Paris, bucking a one percent gain by the CAC 40 blue-chip index at 3,805.94 points.

The group controls 80 percent of aircraft manufacturer Airbus Industrie and on Friday unveiled plans to develop the A350, a medium-size, long-haul jet to compete directly with the future fuel-efficient 7E7 Dreamliner from US rival Boeing.

But whatever lift might have come from the new initiative was undermined by a later report on its financial prospects.

US broker Goldman Sachs on Monday downgraded EADS shares to "in-line" from "outperform," noting that the group had issued financial guidance for 2005 that was 10 percent below Goldman Sachs forecasts.

It said it was also concerned that several programmes, in particular development of the A380, "appear to be encountering problems" that could indicate management distraction due to recent conflict within the company.

Analysts pointed to a row over the appointment of a new EADS co-chief executive to serve alongside a German colleague to represent French interests in the group. The term of the current French co-chief executive, Philippe Camus, expires in July and press reports have said Noel Forgeard, Airbus chief executive, wants the job.

In Paris Exane BNP Paribas lowered its recommendation to "neutral" from "buy" after EADS reported a projected operating profit next year of EUR 2.4 billion (USD 3.2 billion), 15 percent less than Exane's estimates.

Exane said its principal worry was with the defence unit at EADS, which faced a EUR 77 million restructuring charge in 2004.

"We are now expecting additional restructuring charges in defence activities in 2005," it said.

A Paris trader in addition pointed to potential cost overruns in connection with the A380.

Forgeard disclosed in an interview with the newspaper Le Monde in its Sunday-Monday edition that research and development costs on the A380 could surpass the planned EUR 8.09 billion by 0.5 to EUR 1.5 billion.

"We were expecting cost overruns of EUR 500 million but not more," the trader said.

© AFP

Subject: French News

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