• 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 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.