EADS profits fly but shares dip on A380 costs

9th March 2005, Comments 0 comments

MUNICH, Germany, March 9 (AFP) - The European Aeronautic Defence and Space Company reported on Wednesday a 60-percent surge in net profit for 2004 and raised its target for this year.

MUNICH, Germany, March 9 (AFP) - The European Aeronautic Defence and Space Company reported on Wednesday a 60-percent surge in net profit for 2004 and raised its target for this year.

But it said that the break-even point for its superjumbo airliner, the A380, would be higher than expected, meaning that it would have to sell more aircraft to recover start-up costs because the dollar was weak.

The European conglomerate, which controls the Airbus aircraft manufacturer and has wide-ranging defence aeronautics interests, produces in euros but sells in dollars.

EADS joint chairman Philippe Camus said the A380 project would reach a break-even point when more than 300 planes were sold, if the dollar remained weak against the euro and other currencies.

"If we fix the euro/dollar rate at EUR 1.30, and based on what we have already done for the programme (in terms of currency hedging), and also taking into account the higher development costs, we get a break-even point that is well above 300 planes," Camus said.

Last week, Airbus chief executive Noel Forgeard, set to replace Camus later this year, told Aviation Week magazine that the A380 breakeven point was 270 planes, instead of the 250 planes originally forecast, but he said this was due exclusively to cost overruns.

Shares in EADS dropped 1.51 percent to EUR 23.54 in midday Paris trading, in a market 0.38 percent higher, amid investor disappointment with the higher A380 break-even point and profit taking, dealers said.

"The hike above 300 aircraft isn't good news," said Harald Liberge-Dondous of brokerage Aurel Leven.

"It's an unpopular announcement, even if it isn't a catastrophe," he added.

Net profit surged by 60 percent to EUR 1.03 billion (USD 1.36 billion) from the 2003 figure, fuelled mainly by the Airbus aircraft manufacturing subsidiary, and a switch into profit by space activities.

The result was higher than the company had expected and the group, which owns 80 percent of Airbus, said it was raising its target for operating profit this year.

Total group sales were in line with forecasts at EUR 31.76 billion.

EADS raised its 2005 target for earnings before interest and tax (EBIT) to EUR 2.6 billion from a previous EUR 2.4 billion, saying that the growth it was achieving reflected improved performance by all divisions, partly offset by less favourable foreign exchange coverage and the weakness of the dollar.

The group expected sales this year to rise by 3.9 percent to EUR 33 billion driven by an increase of 10.0 percent in defence activity sales.

The group also said it intended to deliver 350-360 Airbus airliners this year.

EADS noted that 2005's modest increase would reflect higher deliveries of single-aisle aircraft.

"The 2005 aircraft mix will be less favourable than in 2004," it said.

EADS said full-year EBIT, before the writing down of acquired assets and before exceptional items, rose by 58.0 percent to EUR 2.444 billion compared with a target set by the company of more than EUR 2.3 billion.

The operating margin was 7.7 percent, in line with a forecast that it would exceed 7.0 percent, from 5.1 percent in 2003.

The group said that the strong rise of EBIT earnings reflected a sharp increase in profitability by Airbus and the space division.

The Airbus EBIT figure rose to EUR 1.922 billion equivalent to 5.9 percent of sales owing mainly to an increase in the number of aircraft delivered to 320 from 305 in 2003, an increase in the proportion of big aircraft supplied and to efforts to hold down costs.

The space division switched into profit with an EBIT of EUR 10 million from a loss of EUR 400 million in 2003, enabling the business to look forward to solid growth, EADS said.

The board recommended a 25 percent increase in the dividend for 2004 to EUR 0.50 per share.

Earlier, Camus had told AFP that a tightening of links between EADS and the French defence electronics group Thales was no longer on the cards because the German group DaimlerChrysler, the biggest shareholder in EADS with 30 percent, had said it objected.

Camus said: "For the moment, the matter is closed." This was because the head of DaimlerChrysler Juergen Schrempp was not convinced that the proposition was worthwhile. "There has been a debate, and the debate has ended. That's it," Camus said.


Subject: French News

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