09:03 pm - Tuesday
EADS reports nine months results 2009
Amsterdam, The Netherlands - Deliveries continued to be steady across all businesses
(WAPA) - The nine months results of EADS reflect the Group’s successful efforts in prudently managing operations and backlog in a currently challenging business environment. Deliveries continued to be steady across all businesses. Revenues increased slightly to € 29.7 billion. The EBIT before one-off amounted to € 1.7 billion. Foreign exchange effects in particular have weighed on EADS’ nine months EBIT of € 1.1 billion. The order intake of € 24.6 billion mirrors the present slowdown in the commercial segment. EADS’ order book of more than € 378 billion provides a solid platform for continued deliveries in the future. The Net Cash Position stands at € 8.1 billion and strengthens the Group’s position in a volatile economic environment.
“Given the challenging commercial market situation, EADS’ nine months results demonstrate the Group’s resilience in the economic crisis so far. Protecting our cash and managing the order book and deliveries – these business priorities served us well this year. I am particularly satisfied that we received the go-ahead from our customers for the Eurofighter Tranche 3a", said Louis Gallois, CEO of EADS. “New programmes require our utmost attention. Regarding A-400M, we are working with our customers to reach an acceptable solution for all parties and to put this programme on a solid long-term footing. Additionally, the A-380 programme is still a matter of concern; industrial and financial reviews are underway".
Revenues of EADS stood at € 29.7 billion (9m 2008: € 29.4 billion), supported by stronger commercial aircraft deliveries at Airbus (358 units compared to 349) but offset by lower revenue recognition in the A-400M programme and price deterioration on commercial aircraft deliveries. Growth at Astrium (up 17 percent) and Eurocopter (up 9 percent) contributed to the Group’s positive revenue development.
EBIT before one-off – an indicator attempting to capture the underlying margin of the business by excluding non-recurring charges or profits caused by movements in provisions or foreign exchange impacts – stood at € 1.7 billion (9m 2008: € 2.6 billion). Compared to the previous year, the volume increase and Power8 savings were more than offset by degradation of hedge rates, cost increases and the price deterioration on aircraft deliveries. Progress on the A-380 is slower than expected.
The Group’s EBIT was further burdened by exceptional negative foreign exchange impacts and dropped to € 1,089 million (9m 2008: € 2,018 million).
The Group achieved a Net Income of € 291 million (9m 2008: € 1,082 million), or earnings per share of € 0.36 (earnings per share 9m 2008: € 1.34). It was weighed down by the deterioration of EBIT and foreign exchange revaluations impacting the finance result. In total, when compared to 2008, the combination of hedging and revaluation effects resulted in a negative impact of € 1.7 billion on the net income before tax. Self-financed R&D expenses slightly increased to € 1,834 million (9m 2008: € 1,792 million), which underlines EADS’ constant attention to innovation. R&D is expected to ramp up in the last quarter of 2009.
Free Cash Flow before customer financing dropped to € -892 million (9m 2008: € 1,859 million) including an outflow for the A-400M of € -260 million. The deterioration is mainly due to lower EBIT before one-off, a higher ramp-up in inventory and a lower inflow of advance payments compared to the first nine months of 2008, which benefited from strong inflowing orders at Airbus and Eurocopter. Free Cash Flow in the first nine months of 2009 benefited from a healthy inflow of advance payments. Inventories have increased, notably at Airbus. Customer financing for aircraft has remained limited within the first nine months but is expected to increase in the fourth quarter. Free Cash Flow after customer financing amounts to € -1,182 million (9m 2008: € 1,867 million). The Group’s Net Cash position stands at € 8.1 billion (year-end 2008: € 9.2 billion) and continues to serve as a solid basis for EADS in the present market environment. In August, EADS refinanced its € 1 billion Eurobond which will mature in March 2010, maintaining flexibility to this financing platform.
The seasonality of EADS’ defence and institutional business means that top, bottom line and cash performance of those activities tend to be back-loaded.
The Group’s order intake decreased to € 24.6 billion (9m 2008: € 88.7 billion), reflecting the weaker commercial environment. On 30 September 2009, the order book of EADS stood at € 378.0 billion (year-end 2008: € 400.2 billion), including a reduction of € 14 billion due to the revaluation at a weaker US dollar at the end of September compared to the end of December 2008. The defence order book remained stable at € 54.9 billion compared to year-end 2008. Thanks to recent contract awards for the Brazilian military helicopters, the Saudi Arabian border security project and the Eurofighter Tranche 3a, all of which are yet to be booked, the defence order book will see a substantial upswing in the fourth quarter.
At the end of September 2009, EADS had 118,149 employees (year-end 2008: 118,349).
With regard to the A-400M programme, negotiations with the customer OCCAR and the launch nations, which are ongoing, enter the difficult last phase. As previously reported, the current phase of negotiations provides an opportunity for all parties involved to realign the programme. This period gives room to rebase the contract on realistic conditions acceptable to all parties. EADS intends to reduce any further potential loss, but the full financial consequences of the delays will only be known once the negotiations are finalised.
Together with its suppliers and partners, EADS has progressed with the A-400M programme from a technical perspective. With a total of 18 flights and 55 flight hours, the flight test bed for the engine has now been completed. Additionally, the final first flight version of the FADEC software has been received. Testing on the Iron Bird is providing satisfactory results. Given the technical progress achieved, the A-400M’s first flight is anticipated to take place around the end of the year.
Due to the continuing high level of uncertainty on the programme, EADS retained the early stage accounting treatment of this programme. This resulted in an EBIT impact of € -224 million for the first nine months.
Substantial negative income statement impacts may still have to be booked in future periods depending on the progress of development and the outcome of negotiations on the A-400M programme.
EADS regrets the decision of the South African government to withdraw from the A-400M programme and to cancel its order for eight aircraft. Industrial and financial implications for EADS have to be assessed precisely.
Outlook
As in many industries, the macro-economic environment, which includes the recent oil price increases, has impacted the financials of EADS’ commercial customers. The deterioration creates a risk on the commercial delivery outlook. Nevertheless, the Group is cautiously envisaging an improvement of the economic and market conditions in the next months.
Looking ahead to 2010, the Group is still cautiously monitoring its production rates in a soft market environment. Delivery of Power8 savings, a better aircraft pricing level and further progress in space and defence will be challenged by deterioration of hedge rates and uncertainties surrounding the A-380 and if unresolved in 2009 the A-400M.
October 2009 figures further confirm the bottoming out of the cycle for freight and passenger traffic, notably in emerging economies. Worldwide passenger traffic has increased for the first time since November 2008.
From an economic standpoint, the continuous weakening of the Dollar – although not an immediate threat in the short term thanks to the Group’s long-term hedging policy and cost-cutting initiatives – is challenging EADS’ performance because of a weakening hedge book over time. The long-term Dollar level is an important driver for EADS’ earnings power over the coming years.
In a challenging market, EADS maintains its estimate for new gross orders figure of up to 300 aircraft in 2009. Production rates remain stable. 2009 deliveries are expected to be around 490 aircraft. For 2010, EADS is still working with its customers to establish a total delivery outlook including the A380 programme. Using € 1 = $ 1.39 (used in the previous guidance) as the average spot rate, EADS 2009 revenues should be roughly in line with the 2008 level. However, further deterioration of exchange rates in the fourth quarter could lead to slightly lower Group revenues.
Due to ongoing uncertainties on the magnitude of the potential A-400M and A-380 charges in the fourth quarter, EADS is not able to give a guidance for EBIT for the full year. Under a continuation scenario, which is deemed the most probable, the A-400M provision for which € 2.4 billion in charges have already been accrued has a wide range of possible outcomes depending on the negotiation process and could substantially alter the financial statements of EADS in the future.
EBIT before one-off for full-year 2009 should amount to around € 2 billion. In a difficult environment, the Group’s Cash Flow management continues to deliver better results than expected with a cash-flow consumption now expected to be less than € 1 billion (excluding A-400M) including lower customer financing needs than anticipated.
Divisions: strong delivery patterns across all businesses
Effective as of 2009, the former Military Transport Aircraft Division has been fully integrated into Airbus and is now named Airbus Military.
Airbus’ consolidated revenues amounted to € 20,193 million (9m 2008 adjusted: € 20,565 million). The volume of commercial aircraft deliveries continued to achieve a record number of 358 commercial aircraft (9m 2008: 349). Revenues were burdened by price deterioration on aircraft delivered and lower revenue recognition in the A-400M programme. Airbus' EBIT of € 523 million (9m 2008 adjusted: € 1,464 million) was impacted by exceptional foreign exchange effects and an A400M charge. Before these exceptionals, EBIT before one-off stood at € 1.1 billion (9m 2008 adjusted: € 1.9 billion). Compared to the previous year, higher volumes and Power8 savings were more than offset by hedge rate degradation, price deterioration on aircraft delivered and cost increases. Progress on the A-380 is slower than expected. In 2009, the A-380 programme has faced both continuing production instability and customer requests for delivery postponements. As a result, the production plan is under review and a couple of deliveries for year-end will likely shift into early 2010.
A lower level of commercial activity is reflected in the net order intake. However, 59 new firm gross orders were booked in the third quarter, demonstrating a continued demand for new aircraft, albeit at a lower level than last year. Cancellations remain at a low level with only 26 recorded in the nine month period. At the end of September, Airbus had received 149 gross orders (123 net orders) for commercial aircraft (9m 2008: 785 gross orders, 737 net orders). In October, Airbus delivered its first A-380 to an European airline, Air France, which increases the number of operators to four for this aircraft type.
As of 30 September 2009, Airbus’ consolidated order book was valued at € 332.0 billion (year-end 2008 adjusted: € 357.8 billion) after the negative foreign exchange revaluation of € 14 billion based on list prices. The order book for commercial aircraft amounted to € 319.5 billion, which equals 3,480 units (year-end 2008: 3,715 aircraft).
Airbus Military revenues accounted for € 1,637 million (9m 2008: € 1,949 million) of the Airbus total. Revenues benefited from an increase in tanker activity and the Medium and Light segment. They were more than offset by lower revenue recognition on the A-400M programme, where 2008 figures included the Power On milestone and the first application of early stage accounting. EBIT stood at € -5 million (9m 2008: € -68 million).
Airbus Military booked ten Medium and Light military aircraft orders, two each for Thailand and Mexico, four for the Czech Republic and one each for Colombia and Botswana. Moreover, Airbus Military underscored its strong position in the tanker business with an order for three additional A-330 Multi-Role Tanker Transport (MRTT) aircraft by Saudi Arabia. This brings the total Saudi-Arabian order to six A-330 MRTT aircraft. At the end of September 2009, the order book of Airbus Military amounted to € 21.7 billion (year-end 2008: € 22.3 billion).
In the first nine months of 2009, revenues for the Eurocopter Division grew by 9 percent to € 3,039 million (9m 2008: € 2,781 million). Deliveries reached 392 helicopters compared to 404 in the same period of the previous year; revenue growth was achieved through a favourable mix in serial activities and an increase in customer services. The Division’s EBIT remained stable at € 165 million (9m 2008: € 164 million). The effect of a favourable mix was offset by higher R&D expenses due to strong efforts on innovation and product investments, margin pressure on the NH90 programme and a negative foreign exchange impact.
In September, the British Ministry of Defence awarded a contract to Eurocopter for the Life Extension of 28 Puma helicopters, which will offer enhanced performance and operational capabilities to the Royal Air Force. During summer, the French Army dispatched three Tiger helicopters in operations to Afghanistan. Eurocopter is providing on-site technical assistance.
The trend of bookings over the first nine months has shown a significant slow-down with 179 net bookings registered compared to 605 last year. Current order intake is showing an average decrease of 70 percent in units across the civil product ranges compared to last year. Continuing cancellations demonstrate the decline in the civil market, mainly in the private and corporate segments. Eurocopter has booked 79 unit cancellations to the end of September. However, for the first time in the third quarter the number of cancellations has decreased. Production levels are being closely monitored and adapted accordingly. Important military contracts booked in 2009 should mitigate the decrease in civil bookings but only on a mid-term basis. Eurocopter also launched an internal restructuring programme, called SHAPE, to better face the economic crisis in the civil helicopter market. Eurocopter’s order book stood at € 13.5 billion (year-end 2008: € 13.8 billion) which is the equivalent of 1,304 helicopters (year-end 2008: 1,515 helicopters).
Astrium recorded a strong growth in revenues (up 17 percent) across all businesses in the first nine months. Revenues amounted to € 3,228 million (9m 2008: € 2,749 million). Main contributions came from an increase in navigation and Earth observation satellites, in defence activities and in services both for telecoms and Earth observation sales. Additionally, revenues include a positive one-time effect due to a revenue catch-up for in-orbit incentive schemes on commercial telecom satellites. EBIT improved by 11 percent to € 155 million (9m 2008: € 140 million) which was driven by a ramp-up in productivity in defence and in Earth observation satellites manufacturing. However, this was partially offset by an unfavourable translation effect from the declining British Pound to the Euro foreign exchange rate.
Ariane 5 marked its 33rd consecutive successful launch. In October, the first secure communications satellite for the German Armed Forces, SATCOMBw-1, and the Amazonas 2 satellite for the Spanish operator Hispasat were placed in orbit. With this, Ariane 5 recorded its 47th launch. At the end of September 2009, the order book for Astrium stood at € 14.9 billion (year-end 2008: € 11.0 billion).
The Defence & Security Division’s revenues amounted to € 3,296 million compared to € 3,490 million in the first nine months in 2008. The revenues reflect growth from Eurofighter activities and the consolidation of PlantCML, roughly compensating the aerostructures carve-out to EADS subsidiary Premium AEROTEC of approximately € 280 million. EBIT remained stable at € 220 million (9m 2008: € 219 million). Growth and margin improvements in core programmes were partially offset by higher R&D expenses for innovation and future growth areas such as radar, UAV (unmanned aerial vehicles) systems and the security markets. The segment will benefit from strong seasonality in both revenues and EBIT performance in the last quarter.
Defence & Security further strengthened its leading role in the global fighter aircraft market. In July, the Eurofighter partner nations reached an agreement for the third production tranche which is split into two parts. The first – Tranche 3a, comprising a total of 112 aircraft – was officially awarded. In its UAV systems sector, Defence & Security successfully tested the Barracuda UAV demonstrator in July, which included four test flights under realistic conditions. This new system is equipped with substantially improved software and technologies. At the end of September, the Division’s order book stood at € 16.3 billion (year-end 2008: € 17.0 billion). New orders for the third quarter included Eurofighter Integrated Logistical Services. Recent contract awards for the Saudi Arabian border security project and the Eurofighter Tranche 3a are yet to be booked.
Headquarters and Other Businesses (not belonging to any Division):
As of 2009, the composition of Other Businesses differed compared to 2008. Since EADS now holds only a 30 percent minority stake in DAHER Socata, this unit is consolidated at equity within Other Businesses. Also as of 2009, EADS EFW is consolidated within Airbus accounts. Therefore, Other Businesses now comprise ATR, EADS Sogerma, EADS North America and 30 percent of DAHER Socata at equity.
Revenues of Other Businesses fell to € 723 million (9m 2008 adjusted: € 958 million) mainly reflecting changes in the consolidation perimeter that offset the successful ramp-up in Light Utility Helicopter (LUH) activities at EADS North America. The EBIT of Other Businesses amounted to € 3 million (9m 2008 adjusted: € 33 million). Productivity gains and further progress on Sogerma’s turnaround were offset by negative foreign exchange effects, lower asset management and support activity at ATR and a lower EBIT at EADS North America.
With 30 units, ATR delivered fewer aircraft to its customers during the first nine months of 2009 than in the same period last year (37 units); the current financing environment remains difficult. The delivery outlook remains stable. The number of new gross orders for ATR amounted to 33 units (9m 2008: 7 units). At the end of September, the order book for ATR stood at 158 aircraft. In September 2009, the US Air Force restarted the competition for the replacement of its tanker fleet. The LUH was recently cited by the US Department of Defense as one of five benchmark acquisition programmes in the department’s portfolio. The UH-72As delivered to the US Army have demonstrated a Full Mission Capability rate of over 90 percent during more than 11,000 hours of use. On 30 September 2009, the order book of Other Businesses amounted to € 2.0 billion (year-end 2008 adjusted: € 3.2 billion). This decrease is due to the change of consolidation of DAHER Socata.
EADS reports nine months results 2009.
In particular:
- Steady deliveries thanks to successful order book management
- EBIT before one-off: € 1.7 billion
- EBIT of € 1.1 billion impacted by foreign exchange effects
- Net Income: € 0.3 billion
- Net Cash at € 8.1 billion: a key strength
- A-400M airplane outcome remains subject to ongoing negotiations with launch customers. (Avionews)
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Direttore Clara Moschini