Airbus parent EADS rolled out stronger quarterly profits than expected and stuck to its forecasts for the year despite fresh delays to its A380 superjumbo.
The European group said revenue was lifted by higher production of passenger jets and helicopters and a down-payment on the A400M European military airlifter as it met a key development test, though that project is also running late.
Analysts had expressed concerns over whether EADS would be able to stick to its forecast of a dramatic rise in operating profit in 2008 even before it announced more delays to the world’s largest passenger plane, the A380, on Tuesday.
But it stood by its main forecasts and raised a cashflow target, even though the main source of worry for Europe’s largest aerospace group, the weakness of the dollar against the euro, showed no signs of abating in the first quarter.
EADS is reaping the benefit of three years of record or near-record orders as many airlines opt for more fuel-efficient fleets to escape high oil prices and as aviation prospers in Asia and the Middle East.
Cash advances on the orders have eased the company’s finances and EADS announced it was sitting on an EUR8 billion euro (USD$12.4 billion) pot of cash at the end of the first quarter, preserving much-needed firepower as it restructures to cope with the weak dollar and a widely predicted industry downturn.
EADS reported a first-quarter operating profit of EUR769 million, up from EUR88 million a year earlier, and confirmed its target of EUR1.8 billion for the full year.
It reported a 10 percent rise in quarterly revenue to EUR9.85 billion and net profit of EUR285 million, compared with a EUR10 million net loss a year earlier.
Airbus bounced back into profit with first-quarter operating income of EUR628 million on revenue of EUR7.06 billion after diving into the red due to restructuring charges in the first quarter of last year.
EADS operating earnings were inflated by a surplus of foreign exchange hedging transactions in the quarter which overcompensated for the dollar’s recent slide against the euro, but EADS said this would be reversed in subsequent quarters.
EADS said early development of the future A350 was on time but said it faced a number of challenges on key programs.
It has been banking on a sharp increase in A380 production following two years of delays, but on Tuesday announced delays averaging 2 to 3 months to deliveries in 2008 and 2009 and predicted part of the 2010 schedule would slip.
EADS Chief Executive Louis Gallois said Airbus would compensate airlines for the latest delays to its A380, but also told RTL Radio the penalties would be less severe than those which helped to push Airbus deeply into the red last year.
“It is bad news but not a catastrophe,” Gallois said.
A sometimes outspoken critic of European inaction over currency turmoil, Gallois said the whole European aerospace industry was suffering because of the weakness of the dollar.
He said Airbus was producing planes at a hedged euro rate of USD$1.16 while the dollar had weakened to USD$1.55 to the euro,
Gallois told analysts an enhanced version of Airbus’s Power8 recovery plan would be announced in the second quarter and would focus on ways of buying more supplies denominated in dollars, including from European firms, as well as cost cuts.
(Reuters)
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