• Significant order intake of € 57.7 billion driven by Airbus
• Long Range production rate increases to 9 aircraft per month in
• Revenues of € 31.6 billion
• EBIT* before one-off at € 0.8 billion
• Net income: € 198 million
• Net Cash at € 10.3 billion: better than expected, a key asset
• Increase of Free Cash Flow guidance
EADS’ (stock exchange symbol: EAD) macro-economic and commercial environment continues to improve thanks to increasing aircraft demand. Institutional markets including helicopters, defence and public budgets have to be monitored. At the end of September, the order intake(4) of € 57.7 billion mirrors the improved momentum in commercial aviation. EADS’ order book of more than € 426 billion provides a solid platform for future deliveries. EADS’ revenues amount to € 31.6 billion. The EBIT* before one-off of € 0.8 billion benefited from the underlying performance in Airbus legacy programmes and other core business activities. EBIT* amounted to € 784 million. The Net Cash position of € 10.3 billion is better than expected thanks to better cash performance and favourable phasing. It is a key asset to foster future growth.
“The commercial aviation sector continues its ascent which starts to be reflected in the nine-month results. Within this improving environment, the A380 production is visibly progressing and manufacturing of the A350 has begun. I want to express our gratitude to the A400M Customer Nations who have supported us in reaching an agreement”, said Louis Gallois, CEO of EADS. “At the same time, budget reviews in our home countries are not yet fully completed; we therefore remain attentive to challenges which could arise for our business with government customers. Looking forward, beyond 2011 the upturn in the commercial aircraft business should drive the profitability improvement of the Group. In the mid-term, at the current exchange rates, Airbus should significantly improve its underlying profitability thanks to better volume, pricing and further economic improvement of the A380 performance.”
In the first nine months, EADS’ revenues increased to € 31.6 billion (9m 2009: € 29.7 billion) thanks to growth from both volume and mix effects across core businesses. Physical deliveries remained at a high level with 380 aircraft at Airbus Commercial, 367 helicopters at Eurocopter and the 38th consecutive successful Ariane 5 launch. The percentage-of-completion methodology was resumed on the A400M programme. Until the end of September, based on the allocation of internal milestones, around € 500 million in revenues were booked on the programme. The Customer Nations and EADS have concluded negotiations on the overall A400M discussions. The FY 2009 A400M provision calculation remains valid. Government payments are more back-loaded than expected after the signature of the principle agreement in March 2010. Negotiations on the export levy facility (ELF) scheme are expected to be finalised before the end of the year. Once parliamentary approvals are obtained, the agreement will be binding. In the meantime, the A400M flight test programme is progressing better than expected with the fourth aircraft due to join the flight test campaign before year-end.
EBIT* before one-off (adjusted EBIT*) – an indicator capturing the underlying business margin by excluding non-recurring charges or profits caused by movements in provisions or foreign exchange impacts – stood at € 0.8 billion (9m 2009: € 1.7 billion) for EADS and around € 0.3 billion for Airbus. It benefited from good underlying performance of Airbus legacy programmes and core business activities in the other Divisions. As expected, A380 continues to weigh significantly on the underlying performance. Compared to the first nine months of 2009, EBIT* before one-off was mainly weighed down by the deterioration of hedge rates and higher investment in Research & Development.
EADS’ reported EBIT* stood at € 784 million (9m 2009: € 1,089 million).
Net Income amounted to € 198 million (9m 2009: € 291 million), or earnings per share of € 0.24 (earnings per share 9m 2009: € 0.36). The finance result amounts to € -452 million (9m 2009: € -615 million). The interest result of € -176 million (9m 2009: € -89 million) reflects the decline in interest rates on the financial markets. The other financial result amounts to € -276 million (9m 2009: € -526 million). The improvement year-on-year is due to a positive revaluation of the Group’s U.S. dollar and GBP cash assets and the revaluation of financial instruments.
Self-financed Research & Development (R&D) expenses reached € 2,038 million (9m 2009: € 1,834 million), driven by increases at Airbus due to a ramp-up in A350 XWB activity as well as increasing product investment at Cassidian for the Unmanned Aerial Systems (UAS) and Systems businesses and at Eurocopter across the product range. Going forward R&D expenses should increase at Airbus, Eurocopter and Cassidian.
Free Cash Flow before customer financing of € 882 million (9m 2009: € -892 million) has benefited from good commercial order intake, a high volume of commercial deliveries including 14 A380 as well as favourable phasing. Receipts from governments for development programmes roughly compensate payment delays. At Airbus, inventories remained stable in the first nine months of 2010. The nine-month results of 2009 included a ramp-up on the A380 but a low level of A380 deliveries as well as a mismatch between production and delivery rates for both single aisle and long range aircraft. The inflow of advances linked to Airbus commercial activity was higher than one year ago, reflecting the increase in deliveries and commercial aircraft orders. This positive effect was more than offset by the lower inflows from Astrium and Cassidian. In the first nine months, the net customer financing outflow was lower than expected at around € -90 million due to a combination of appetite from lessors and banking market recovery. The third quarter included the sell down of three A320 operating leases. Free Cash Flow after customer financing amounted to € 791 million (9m 2009: € -1,182 million).
EADS’ Net Cash position amounted to € 10.3 billion (year-end 2009: € 9.8 billion) after a € 300 million contribution to pension fund assets. It continues to provide a solid foundation for the Group’s operational needs as well as future growth.
The order intake of EADS significantly increased to € 57.7 billion compared to one year ago (9m 2009: € 24.6 billion) mainly due to higher commercial aircraft orders. By the end of September 2010, EADS’ order book stood at a robust € 426.4 billion (year-end 2009: € 389.1 billion), mainly reflecting increases at Airbus and Astrium. The Airbus Commercial order book benefited from a positive revaluation impact of around € 18 billion due to the closing spot rate of the U.S. dollar that has significantly strengthened since year-end. The defence order book stood at € 56.4 billion (year-end 2009: € 57.3 billion).
At the end of September 2010, EADS’ workforce consisted of 120,580 employees (year-end 2009: 119,506).
In 2010, Airbus gross orders should be up to 500 thanks to the commercial aircraft upturn and Airbus deliveries should be slightly more than 500.
EADS’ guidance is based on an assumption of €1 = $1.35 for the Q4 2010 average rate and year-end closing spot rate.
EADS revenues should be more than € 44 billion.
At slightly more than 500 deliveries, EADS confirms its EBIT* before one-off guidance at around € 1.2 billion.
Going forward the EBIT* performance of EADS will be dependent on the Group’s ability to execute on the A400M, A380 and A350XWB programmes, in line with the commitments made to its customers.
Using the above exchange rate assumptions, EADS increases its EBIT* guidance to at least € 1.1 billion.
EADS is also increasing its Free Cash Flow guidance. Provided a sustainable year-end cash inflow of institutional and government business, the Free Cash Flow before customer financing should be around € 1 billion and Free Cash Flow after customer financing should be above € 800 million compared to the previously expected free cash outflow of around € -600 million.
EADS Divisions: Benefiting from improving commercial environment while closely monitoring government budget reviews
Airbus’ consolidated revenues of € 21,740 million increased by 8 percent compared to the same period last year (9m 2009: € 20,193 million). The Airbus consolidated EBIT* amounted to € 296 million (9m 2009: € 523 million).
Airbus Commercial revenues amounted to € 20,446 million (9m 2009: € 18,949 million). Deliveries increased to 380 commercial aircraft, of which 376 accounted for revenue recognition (9m 2009: 358 aircraft). Compared to one year ago, Airbus Commercial revenues reflect a favourable volume and mix effect which includes a higher number of A380 deliveries. The negative impact from foreign exchange is around € 0.6 billion. Two Single Aisle and two A330-200 aircraft were delivered under operating lease in the nine months and therefore do not count for revenue and margin recognition. Three of the five Single Aisle aircraft delivered under operating lease in the first half of 2010 have now been sold down in the market, triggering revenue and margin recognition in this quarter, bringing total deliveries under revenue recognition to 131 aircraft for the third quarter. Due to the uplift in commercial aircraft momentum, Airbus is increasing Long Range production rates to 9 aircraft per month in Q1 2012. Airbus Commercial EBIT* decreased to € 328 million compared to € 743 million in the first nine months of 2009. The reduction is driven by the negative impact of foreign exchange effects of around € -0.5 billion. The favourable impact from higher volumes, favourable mix, price improvement and cost savings was reduced by higher R&D driven by a ramp-up in investment on the A350XWB programme and higher non-series costs including a less favourable phasing effect compared to 2009. As expected, the A380 continues to weigh significantly on the underlying performance.
Airbus Military revenues amounted to € 1,540 million (9m 2009: € 1,637 million), benefiting from higher A400M revenue recognition of around € 100 million but offset by lower revenues in Tankers and Medium & Light (M&L). On the A400M, consistent with the return to the percentage-of-completion methodology, the internal milestones passed during 2010 have triggered revenues of around € 500 million. Deliveries amounted to 13 M&L aircraft (9m 2009: 10 aircraft). Airbus Military EBIT* amounted to € -35 million (9m 2009: € -216 million, weighed down by the A400M provision). It reflects a good underlying military aircraft business activity. On the A400M programme, 2010-related losses of around € -60 million reflect a negative currency effect and the under-recovery of fixed costs.
Signalling a clear upturn in the aviation industry, Airbus had received 379 gross commercial orders (9m 2009: 149) until 30 September, 328 aircraft net orders – including 32 additional A380 and 53 A350XWB bringing the A350XWB order total to 558 aircraft. The order intake is well above 2009 levels. This demonstrates continued appetite for growth by emerging countries and a market-return by aircraft lessors. Airbus Military booked orders for 11 aircraft for the nine months.
A380 production is visibly progressing as well: For the first time ever three A380s were delivered each month in July and August. Following the Qantas A380 engine event out of Singapore on 4 November 2010, an international investigation has been launched in the frame of International Civil Aviation Organisation Annex 13 recommendations. This investigation is ongoing.
Production on the A350XWB programme is moving forward: In the third quarter manufacturing commenced for the upper wing cover, the lower wing cover and the centre wing box. The Landing Gear Systems Test Facility was also opened during the quarter. The development of the programme is still challenging. EADS is considering Entry-into-Service in H2 2013 and, at this stage, would expect to manage this without significant financial impact.
A new chapter in the cargo market was opened when the first A330-200F was delivered to Etihad Crystal Cargo in the summer; four aircraft were delivered by the end of September.
At Airbus Military, the A400M test programme continues to deliver better than expected results; the fleet of three aircraft had accumulated 765 flight-hours in 230 flights by early November. The ultimate load campaign is completed with the static specimen and the fourth aircraft is due to join the flight test campaign before the end of 2010. Considerable progress has been made in the Tanker business: The A330 Multi Role Tanker Transport (MRTT) has obtained military certification from Spanish authorities, paving the way for the first delivery to the Royal Australian Air Force. A successful first flight for the Future Strategic Tanker Aircraft (FSTA) for the British Royal Air Force was conducted in September.
As of 30 September 2010, Airbus’ consolidated order book was valued at € 377.3 billion (year-end 2009: € 339.7 billion). Airbus Commercial accounted for € 358.1 billion (year-end 2009: € 320.3 billion) which equals 3,436 units (year-end 2009: 3,488 aircraft) – after a positive revaluation impact of around € 18 billion due to the closing spot rate of the U.S. dollar that has significantly strengthened since year-end. The Airbus Military order book remained stable at € 20.6 billion (year-end 2009: € 20.7 billion).
In the first nine months of 2010, revenues for Eurocopter amounted to € 3,085 million (9m 2009: € 3,039 million). Revenues reflect higher NH90 activity, a favourable mix due to milestone progress on the Korean Utility Helicopter (KUH) but are weighed down by lower deliveries of commercial helicopters. The Division’s EBIT* decreased to € 121 million (9m 2009: € 165 million), driven by a charge and margin adjustment on the NH90 programme and a restructuring charge as well as higher product investment. A positive one-time effect was booked linked to a technical milestone on the KUH programme. NH90, KUH and restructuring one-timers were booked in H1 2010.
Eurocopter successfully performed the first flight of its X3 technology demonstrator in September, opening new long-term perspectives to customers looking for long-range and high-speed. Eurocopter and Japan’s Kawasaki Heavy Industries Aerospace Company renewed their cooperation agreement for the development and manufacturing of the EC145, building upon more than 30 years of successful cooperation.
Over the first nine months, Eurocopter has seen the start of a positive trend of bookings with 230 net orders registered compared to 179 during the same period last year. Contracts booked in the third quarter include 12 EC725 for the Malaysian Ministry of Defence. The cancellation trend is slowing, with 38 cancellations up to the end of September compared to 79 for the same period last year. Recovery in the civil market is slow, in particular due to a high number of second hand helicopters in the market. Eurocopter has proactively started to adapt to this challenge by launching its SHAPE programme in April. Good progress has been made on the reduction of temporary workforce and overheads. Deliveries in the first nine months totalled 367 helicopters (9m 2009: 392 helicopter deliveries) including 19 NH90 and seven Tigers. Significant progress was made on the NH90 with ten deliveries in the third quarter. Eurocopter’s order book stood stable at € 15.0 billion (year-end 2009: € 15.1 billion) with 1,166 helicopters (year-end 2009: 1,303 helicopters).
Astrium revenues in the first nine months remained stable at € 3,226 million (9m 2009: € 3,228 million), despite the one-time catch up effect booked in 2009. They reflect positive volume effects across core businesses driven by a strong delivery pattern. EBIT* improved by two percent to € 158 million (9m 2009: € 155 million), thanks to growth and productivity in institutional activities and military telecommunication services reduced by lower activity in navigation satellites and Earth observation services.
During the third quarter, Astrium achieved the 38th consecutive successful Ariane 5 launch as well as the launch of the ALSAT-2A Earth observation satellite built by Astrium for the Algerian Space Agency. Over the summer, the M51 Acceptance Launch was successfully carried out. Furthermore, Astrium agreed on an exclusive partnership with ScanEx for distribution rights on Spot 6 & 7 satellites.
Astrium’s order intake reached € 3.8 billion in the first nine months of 2010, demonstrating continued order momentum from both commercial and institutional customers so far despite increasing competition across all business segments. However, it was significantly lower than in the first nine months of 2009 (€ 7.0 billion) which included the Ariane 5 PB batch of 35 launchers. New orders booked in the quarter include the M51.2 evolution contract award from the French Defence Procurement Agency (DGA). At the end of September 2010, the order book for Astrium increased to € 15.3 billion (year-end 2009: € 14.7 billion).
In the first nine months of 2010, Cassidian’s revenues of € 3,470 million increased by five percent compared to the previous year (9m 2009: € 3,296 million). Revenues reflect higher volume from core and export in Eurofighter and Missile programmes. EBIT* amounted to € 204 million (9m 2009: € 220 million), reflecting margin growth in mature programmes that is more than outweighed by significant growth in self-funded R&D. The investment is focused mainly on UAS and secure communications. In the UAS sector, the successful test campaign of the Barracuda demonstrator is proving the Division’s strong capabilities in the field of unmanned aerial systems. EADS continues to investigate requirements and funding solutions for the Talarion UAS with customers. EADS continues to stress the need for a timely commitment to the programme by governments. Looking beyond 2010, there should be limited short-term pressure on Cassidian EBIT* resulting from higher R&D expenses, a less favourable business mix and government budget constraints.
Cassidian acquired UK-based Regency IT Consulting, thereby strengthening its capabilities in the cyber-security market. In its missile business, the MEADS final system Critical Design Review has been completed while in Electronics, development of a new Active Electronic Scanned Array radar system has begun, which will improve the export potential of the Eurofighter. At the end of September 2010, the Division’s order book stood at a solid € 17.8 billion (year-end 2009: € 18.8 billion). Order intake for the first nine months of 2010 amounted to € 2.6 billion (9m 2009: € 3.4 billion).
Headquarters and Other Businesses (not belonging to any Division)
Revenues of Other Businesses increased by 11 percent to € 805 million
(9m 2009: € 723 million). This increase was driven by higher deliveries at ATR and by a ramp-up in Light Utility Helicopter (LUH) deliveries at EADS North America. EBIT* of Other Businesses amounted to € -6 million (9m 2009: € 3 million) as the positive contribution from Sogerma was offset by a negative foreign exchange impact at ATR.
At ATR, the market and financing environments are improving: ATR delivered 35 aircraft in the first nine months (9m 2009: 30 aircraft) and received 63 firm orders (9m 2009: 33 orders) as well as 33 options in the first nine months. In September, ATR delivered its 900th aircraft, received by the Brazilian airline TRIP Linhas Aéreas. At the end of September 2010, ATR’s order book stood at 161 aircraft.
The ramp-up on the LUH programme continues to progress well with 36 helicopters delivered by the end of September. On 30 September 2010, the order book of Other Businesses stood at € 2.2 billion (year-end 2009: € 2.0 billion).
* 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.
EADS is a global leader in aerospace, defence and related services. In 2009, the Group – comprising Airbus, Astrium, Cassidian and Eurocopter – generated revenues of € 42.8 billion and employed a workforce of more than 119,000.
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Q3 2010 revenues grew 18 percent year-on-year driven by solid delivery patterns at Airbus, Astrium and Cassidian. This growth was partially reduced by lower commercial deliveries at Eurocopter.
EBIT* growth was driven by more favourable one-time effects at Airbus Commercial and Airbus Military as well as better performance at Cassidian partially offset by higher R&D at Eurocopter.
Footnotes for pages 10 to 12:
1) Earnings before interest, taxes, depreciation, amortisation and exceptionals.
2) Earnings before interest and taxes, pre goodwill impairment and exceptionals.
3) EADS continues to use the term Net Income. It is identical with Profit for the period attributable to equity owners of the parent as defined by IFRS Rules.
4) Contributions from commercial aircraft activities to EADS Order Intake and Order Book based on list prices.
5) Following integration of Airbus Military into Airbus, Airbus is now reporting in two segments: Airbus Commercial and Airbus Military. The Airbus Commercial perimeter includes EFW and the completed aerostructures reorganisation but now excludes the A400M. Airbus Military includes the former Military Transport Aircraft Division as well as A400M Airbus operations. Eliminations are treated at the Division level. Airbus Commercial figures for the nine months and the third quarter of 2009 are now shown in detail and Airbus Military’s EBIT* for the nine months and the third quarter of 2009 have been restated to reflect the changes.
Safe Harbour Statement:
Certain statements contained in this press release are not historical facts but rather are statements of future expectations and other forward-looking statements that are based on management’s beliefs. These statements reflect the EADS’ views and assumptions as of the date of the statements and involve known and unknown risk and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.
When used in this press release, words such as “anticipate”, “believe”, “estimate”, “expect”, “may”, “intend”, “plan to” and “project” are intended to identify forward-looking statements.
This forward looking information is based upon a number of assumptions including without limitation: assumption regarding demand, current and future markets for EADS’ products and services, internal performance, customer financing, customer, supplier and subcontractor performance or contracts negotiations, favourable outcomes of certain pending sales campaigns.
Forward looking statements are subject to uncertainty and actual future results and trends may differ materially depending on variety of factors including without limitation: general economic and labour conditions, including in particular economic conditions in Europe, North America and Asia, legal, financial and governmental risk related to international transactions, the cyclical nature of some of EADS’ businesses, volatility of the market for certain products and services, product performance risks, collective bargaining labour disputes, factors that result in significant and prolonged disruption to air travel world wide, the outcome of political and legal processes, including uncertainty regarding government funding of certain programs, consolidation among competitors in the aerospace industry, the cost of developing, and the commercial success of new products, exchange rate and interest rate spread fluctuations between the Euro and the U.S. dollar and other currencies, legal proceeding and other economic, political and technological risk and uncertainties. Additional information regarding these factors is contained in the Company’s “registration document” dated 21 April 2010. For more information, please refer to www.eads.com.
EADS – Nine-Month (9m) Results 2010 (reviewed)
(Amounts in Euro)
For footnotes please refer to page 13.
For footnotes please refer to page 13.
EADS – Third Quarter Results (Q3) 2010
(Amounts in Euro)
For footnotes please refer to page 13.