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10 March 2008
Company

Ad-hoc release, 11 March 2008. EADS – FY 2007 results. Strong business performance while facing significant challenges

Amsterdam

  • Order intake doubled to Euro 136.8 billion
  • 2007 EBIT* of Euro 52 million
  • Strong Free Cash Flow before customer financing (Euro 3.4 billion) reflects robust contributions from operations – Net Cash Position surged to Euro 7.0 billion
  • Revenues stable despite unfavourable US dollar
  • EADS expects recovery in 2008 with EBIT* guidance of
    Euro 1.8 billion

EADS (stock exchange symbol: EAD) delivered a strong business performance in 2007 while experiencing significant challenges. The Group's order intake, at record heights, doubled compared to the previous year and the EBIT* reached break-even, as was indicated in EADS' revised guidance. For 2008, the Group targets an EBIT* of Euro 1.8 billion.

“2007 was a tough year with many high profile challenges to be overcome. The whole of EADS has shown strength and dedication in tackling these challenges and while there is still a lot of work to be done in order to regain the full trust of our investors and customers we have made a lot of progress. We have implemented a simplified governance structure and maintained high levels of investment in research and technology. The focus on efficiency and changes from Power8 are a precondition for continued investment in EADS' future,” said EADS CEO Louis Gallois. “EADS refuels for future success and is taking definite steps to deliver against the ambitious goals of Vision 2020. We have fixed a lot of issues, and our cash situation allows us flexibility in the face of global economic challenges. We are cautious by nature, but I feel EADS is establishing a firm footing on higher ground.”

While the Power8 restructuring programme registered initial savings, Airbus mastered a further ramp-up in aircraft deliveries, especially for the A320 Family. Two A380s are currently in service with Singapore Airlines. Eurocopter continued its increase in serial helicopter production and service business. EADS Astrium raised Ariane 5 production rate, benefited from growth in Paradigm services and achieved a technological success seeing the Columbus space laboratory integrated in the International Space Station ISS. Operational improvements in the Defence & Security Division came from both Military Air Systems and Defence and Communication Systems.

Revenues stood at Euro 39.1 billion (FY 2006: Euro 39.4 billion), supported by higher commercial aircraft deliveries at Airbus (453 units versus 434 compared to the previous year), as well as increased volumes at Eurocopter and EADS Astrium. Despite an unfavourable US Dollar impact and a decrease in A400M revenue recognition Group revenues remained roughly stable in comparison with the previous year. EADS achieved 55 percent of its revenues outside Europe due to strong contributions from Asia-Pacific (23 percent), North America (20 percent) and other regions (12 percent).

EADS’ EBIT* (pre goodwill and exceptionals) for 2007 stood at Euro 52 million compared to Euro 399 million in 2006. The EBIT* was strongly burdened by a Group-wide A400M charge (reflecting programme delays of 6 to 12 months) and by Power8 restructuring and A350 XWB charges. EBIT* suffered from a negative impact of the weak US Dollar. Maturing of less attractive hedges than in 2006 was more than balanced out by revaluations on liabilities. However, the US Dollar impact on provisions put additional pressure on the Group's EBIT*. Nevertheless, the underlying business performance of EADS’ legacy programmes continued to improve. Positive contributions came from the ramp-up in Airbus deliveries and the strong helicopter, defence and space businesses.
EADS recorded a Net Loss of Euro 446 million (Net Income FY 2006: Euro 99 million), or a loss per share of Euro 0.56 (earnings per share FY 2006: Euro 0.12). In the year under review, self-financed R&D expenses increased to Euro 2,608 million (FY 2006: Euro 2,458 million). This reflects Airbus’ continuing aircraft development programmes, especially for the A350 XWB.

Free Cash Flow before customer financing increased to Euro 3,426 million (FY 2006: Euro 869 million) due to an improved cash flow from operations and – thanks to stricter criteria on investment decisions – a reduced capital expenditure. The improvement in operating cash flow was mainly related to a stronger inflow of customer advance payments (incl. a Paradigm refinancing step-up of Euro 1.1 billion) and only partly offset by the build-up of inventories. Free Cash Flow including customer financing improved to Euro 3,487 million (FY 2006: Euro 2,029 million) as the above described positive impacts were largely offset by a lower net contribution from sell-down of customer financing assets. In the course of 2007, the Net Cash Position grew to Euro 7.0 billion (year-end 2006: Euro 4.2 billion).

The Group's sales successes, its financial strengths and its encouraging operational performance in legacy programmes, is reflected in the dividend. The Board of Directors is proposing to the Annual General Meeting of shareholders a dividend of Euro 0.12 per share (dividend per share 2006: Euro 0.12).

“Paying a dividend – even if it is limited and despite a net loss – is more than a gesture of appreciation for the shareholders' loyalty: it's clearly an expression of confidence in the outlook for the years ahead, despite the challenges we will have to overcome,” EADS CFO Hans Peter Ring commented.

EADS doubled its order intake in 2007 despite the weaker US Dollar and achieved a record of Euro 136.8 billion (FY 2006: Euro 69.0 billion). The main drivers were the vast upswing at Airbus (up 120 percent) and the remarkable growth at Defence & Security (up 45 percent) and Eurocopter (up 35 percent). In a favourable market environment the Group benefited from both robust demand and an attractive product offering across its entire portfolio.

By year-end 2007, EADS’ order book reached an all-time high of
Euro 339.5 billion (year-end 2006: Euro 262.8 billion). It achieved this 29 percent growth despite performing a Euro -19.9 billion revaluation due to the weaker US Dollar at year-end. Orders within the commercial aircraft business are based on list prices. The Group further expanded its defence order book through new contracts for Eurocopter, EADS Astrium and Defence & Security; it closed the year at Euro 54.5 billion (year-end 2006: Euro 52.9 billion). At the end of December, EADS had 116,493 employees (year-end 2006: 116,805).

Outlook

The EADS guidance and outlook are based on an exchange rate of Euro 1 = US$ 1.45.

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.

EADS expects Airbus to capture about 700 aircraft orders in 2008.

EADS revenues are expected to exceed Euro 40 billion in 2008, with about 470 aircraft deliveries for the full year.

EADS expects its 2008 EBIT* at Euro 1.8 billion, reflecting higher comfort in its improving ability to drive profitability, yet recognising evolving economic and cost challenges. This figure contains allowances for planning contingencies. However, it does not take into account the possible influence of short-term currency movements on revaluations of existing provisions, nor does it take into account an impact from the potential sale of industrial sites.

While they are not without risk, EADS does not presently expect a further material deterioration of its critical development programmes.

Before the impact of customer financing, EADS presently expects 2008 Free Cash Flow at Euro 0.5 billion (keeping in mind it is the most volatile item to predict).

EBIT

EADS uses EBIT pre goodwill impairment and exceptionals as a key indicator of its economic performance. The term “exceptionals” refers to such items as depreciation expenses of fair value adjustments relating to the EADS merger, the Airbus Combination and the formation of MBDA, as well as impairment charges thereon.

Contact:

Pierre Bayle Tel.: +33 1 42 24 20 63
Markus Wölfle Tel.: +49 89 60734287

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