EADS net loss worse than expected
European aerospace group EADS reported a wider than expected 2007 net loss of €446 million ($685 million) on Tuesday, but said it had turned the corner on industrial problems recently gripping the company.
The loss compared with a slender €99m profit in 2006 and market forecasts of a €329m loss in 2007.
The Airbus parent, hit by delays to its A380 superjumbo and a weak dollar, also posted below-consensus operating profit of €52m, down from €399m in 2006.
Group revenues dipped to €39.1bn in 2007 from €39.434bn in 2006, due mainly to the weaker US currency.
EADS said it expected a recovery in 2008 and predicted an operating profit of €1.8bn and revenues topping €40bn, based on a euro at $1.45.
"Improvements across the board and our recent success on the US defence market point to a promising start into 2008," Chief Executive Louis Gallois said in a statement.
EADS shares were indicated 1.2 per cent lower in Frankfurt against an overall positive market.
EADS and Northrop Grumman won a $35 billion aerial refuelling tanker contract from the US Air Force on February 29 but rival Boeing said late on Monday that it would file a protest.
EADS, also facing delays to its A400M military heavylifter and NH90 naval helicopter, said it did not expect a "further material deterioration" in its main industrial programmes.
It dug into reserves by proposing a stable dividend of 12 euro cents a share despite the net loss.
Shareholders awarded themselves the maximum allowable 2006 dividend of 12 cents at an annual meeting last year after core investors failed to make a recommendation. Tensions between French and German core shareholders appeared to ease when the company's dual management structure was simplified in mid-2007.
The European company's 2007 earnings were impacted by the second annual loss in a row at Airbus after production delays resulted in penalties to airlines and restructuring charges.
Airbus revenues rose slightly to €25.216bn from €25.190bn but the planemaker posted a 2007 loss of €881m, also worse than many analysts had expected.
EADS said growth at Airbus was offset by a negative dollar impact of €1.08bn.
Analysts had on average forecast a 2007 EADS group net loss of €329m and a group operating profit of €152m on revenues of €39.27bn, according to a March 6 Reuters consensus survey.
The same survey projected revenues of €24.838bn and an operating loss of €716m at the Airbus unit after restructuring charges and launch costs for the A350.
However, the figures met the company's own main forecast after EADS said with its 9-month figures in November that its full-year operating profit was expected to "roughly break-even".
EADS defines operating income as earnings before interest and tax (EBIT) preceding goodwill impairment and exceptionals.
EADS reiterated it expected Airbus to win 700 orders in 2008, around half last year's record, and said it would deliver about 470 aircraft, up from 453 in 2007.
"Based on continued economic growth and comforted by a solid order book, despite the volatility of markets, the group believes in the continuation of a resilient commercial aircraft market and Airbus deliveries peaking in 2011-2012," it said.
EADS said the pricing of Airbus aircraft had deteriorated in 2007. It books revenues when planes are delivered, which can be several years after they are ordered, meaning some deliveries date back to contracts before a three-year boom in orders.
Airbus has said pricing on new contracts has been improving.
Despite the weaker than expected earnings in accounting terms, EADS generated more cash than expected in 2007 as free cash flow reached €3.4bn, far exceeding the EADS best-case forecast of more than €1bn.
The company's net cash position rose to €7bn.
Record orders at the Paris air show triggered a slew of advance payments and financing for the unit which operates Britain's military satellites brought in another €1.1bn.
EADS however said it had boosted cash partly by cutting back on capital spending.
EADS took a €1.366bn charge in the third quarter including €1.1bn at Airbus for delays to its A400M military heavy lifter programme for 7 European NATO countries.
The programme is running 6-12 months late and first flight has been pushed back to July 2008. Defence officials say the date could slip again due to continued engine problems.
By the 9-months stage, Airbus had also taken 500 million euros in charges for the launch of the A350 and 688 million for its Power8 restructuring programme to overhaul Airbus.
The plan involves 10,000 job cuts and the full or partial sale of up to 7 Airbus or EADS factories.
EADS said negotiations were continuing for factory sales with French, German and British preferred bidders and no binding contract had been reached.
EADS has been wrestling with industrial difficulties and a weak dollar despite a recent boom in mainly civil jet orders. EADS said it had doubled its order intake in 2007 to a record €13bn, pushing its order book to €340bn. (Reuters)
Follow Emirates 24|7 on Google News.