EADS (stock exchange symbol: EAD) achieved robust financial results in the first nine-months of 2012. Order intake(5) in the first nine months reached € 50.4 billion driven by solid order activity at Eurocopter, Astrium, Cassidian and Airbus Military and ongoing momentum at Airbus Commercial. At the end of September, EADS’ order book(5) stood at € 547.5 billion showing resilience and providing visibility in the current macro environment. Revenues amounted to € 37.3 billion. The EBIT* before one-off of around € 1.9 billion benefited from a strong underlying performance.
The reported EBIT* amounted to € 1.6 billion, significantly above the 2011 level.
The Net Cash position amounted to € 8.1 billion.
“Our performance over the first nine months shows double-digit revenue growth and a strong increase in profitability. The latter reflects, not least, our continued focus on programme management and execution,” said Tom Enders, CEO of EADS. “However, we will not run out of operational challenges anytime soon, especially at Eurocopter and Airbus. And for the rest of the year, we’ll put strong emphasis on cash generation. Aircraft deliveries are key.”
In the first nine months of 2012, EADS’ revenues increased 14 percent to € 37.3 billion (9m 2011: € 32.7 billion) driven by growth across all Divisions. The newly acquired companies in 2011 contributed around € 1 billion to this growth. Until the end of September, physical deliveries continued to be at a high level with 405 aircraft at Airbus Commercial and 300 helicopters at Eurocopter. In September, Astrium achieved the 51st consecutive successful Ariane 5 launch.
EBIT* before one-off – 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 around € 1.9 billion (9m 2011: around € 1.1 billion) for EADS and at around € 1.2 billion for Airbus (9m 2011: around € 0.4 billion). The increase compared to the same period last year is driven by operational improvement at Airbus Commercial including favourable volume and better pricing. Astrium’s growth is driven by productivity improvements and the integration of Vizada. In Eurocopter, despite an unfavourable product mix in the third quarter and higher Research & Development expenses, EBIT* before one-off is stable. As expected, Cassidian’s 2012 profitability is impacted by the business transformation and globalisation.
During the first nine months of 2012, EADS accelerated its hedge activity and implemented $ 27 billion of new hedge contracts at an average rate of € 1 = $ 1.29, which enhances the stability of the Group’s financial performance. At the end of September, EADS’ total hedge portfolio stood at $ 86.4 billion.
EADS’ reported EBIT* increased by 82 percent to € 1,615 million (9m 2011: € 885 million), driven by the improvement of the EBIT* before one-off.
In the first nine months of 2012, the dollar mismatch and balance sheet revaluation had a positive impact on the EBIT* of around € 70 million.
The A350 XWB charge of € 124 million is unchanged compared to H1 2012 as Airbus progresses within the amended schedule, which was communicated in July. However, the programme remains challenging.
Airbus is progressing, as planned, on the A380 wing rib technical fix development. The total charges recorded so far in 2012 amount to € 0.2 billion. Airbus still targets 30 A380 deliveries for 2012 which means the total charge for the A380 wing rib feet is still expected to reach around € 260 million for the full year.
Following the Hawker Beechcraft (HBC) decision to shut down all their jet lines and despite EADS’ efforts to actively seek an acquirer for HBC as a whole including jets, the programme closure has resulted in an exceptional charge of € 76 million in the third quarter.
Net Income rose sharply to € 903 million (9m 2011: € 421 million), or earnings per share of € 1.10 (earnings per share 9m 2011: € 0.52). The Net Income* before one-off(4) increased to € 1.1 billion (9m 2011: € 607 million) in line with the strong underlying performance.
The finance result amounted to € -337 million (9m 2011: € -212 million). The interest result of € -237 million (9m 2011: € -9 million) deteriorated compared to the 2011 level, mainly due to lower interest income reflecting the evolution of interest rates. In addition, the 2011 interest result benefited from a positive one-time release of € 120 million due to the termination of the A340 programme.
The other financial result of € -100 million (9m 2011: € -203 million) includes an improved impact from a foreign exchange revaluation compared to 9m 2011. This line also includes the unwinding of discounted provisions.
Self-financed Research & Development (R&D) expenses remained broadly stable at € 2,145 million (9m 2011: € 2,151 million).
Free Cash Flow before acquisitions amounted to € -3,235 million (9m 2011: € 587 million). Operational performance improved significantly compared to the same period last year. However, it is weighed down by a significant temporary deterioration in working capital which reflects the back-loaded delivery pattern and the significant industrial ramp up efforts, especially at Airbus and Eurocopter. In addition, government payment profiles and milestone achievements are back-loaded, particularly at Cassidian.
In the first nine months of 2012, low customer financing support of € -97 million had been provided, demonstrating continuing appetite for asset-based financing and continued Export Credit Agency support for deliveries.
The level of capital expenditure continued to increase, mainly at Airbus driven by
A350 XWB as well as Single Aisle and Long Range rate increases. It includes a capitalisation of development costs, mainly for the A350 XWB programme.
The Q4 cash flow should reflect the reversal of working capital requirements driven by deliveries and payments from institutional customers.
Free Cash Flow after customer financing amounted to € -3,376 million (9m 2011: € 155 million).
The Net Cash position of EADS amounted to € 8.1 billion (year-end 2011: € 11.7 billion), also reflecting a cash contribution to pension assets of € 331 million as well as the dividend payment of around € 370 million.
EADS’ order intake(5) amounted to € 50.4 billion (9m 2011: € 93.9 billion) and was encouraging across all Divisions. The 9m 2011 order intake included exceptional orders booked at Paris Air Show, particularly for the A320neo.
At the end of September 2012, the Group’s order book(5) stood at € 547.5 billion (year-end 2011: € 541.0 billion), providing a solid platform for future growth.
The defence order book amounted to € 51.1 billion (year-end 2011: € 52.8 billion).
At the end of September 2012, EADS’ workforce consisted of 137,415 employees, (year-end 2011: 133,115).
As the basis for EADS’ 2012 guidance, EADS expects the world economy and air traffic to grow in line with prevailing independent forecasts and assumes no major disruption due to the current euro crisis.
As EADS’ nine-month results confirm its growth and improvement trend, the Group reaffirms with increased confidence its 2012 earnings guidance.
In 2012, Airbus should deliver around 580 commercial aircraft, including 30 targeted A380 deliveries.
Gross orders should be above the number of deliveries, in the range of 600 to 650 aircraft.
Based on an assumption of € 1 = $ 1.30, EADS 2012 revenues should grow in excess of 10 percent.
Based on the Group’s solid underlying operating performance, EADS expects 2012 Group EBIT* before one-off to be around € 2.7 billion.
As a result and with an expected tax rate for the full year of slightly below 30 percent, the EADS 2012 EPS* before one-off(4) should be around € 1.95 (FY 2011: € 1.39).
Going forward, the reported EBIT* and EPS* performance of EADS will be dependent on the Group’s ability to execute on its complex programmes such as military helicopters, A400M, A380 and A350 XWB, in line with the commitments made to customers. Reported EBIT* and EPS* also depend on exchange rate fluctuations.
Based on the targeted 30 A380 deliveries and assuming no change in government payment behaviour, EADS aims to be Free Cash Flow break-even after customer financing and before acquisitions.
* 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 2011, the Group – comprising Airbus, Astrium, Cassidian and Eurocopter – generated revenues of € 49.1 billion and employed a workforce of over 133,000.
EADS – Nine-Month (9m) Results 2012 (reviewed)
(Amounts in euro)
EADS – Third Quarter Results (Q3) 2012
(Amounts in euro)