Revenues up 10 percent to Group total of € 9.9 billion –
growth across all Divisions
- EBIT* grew to € 769 million despite burden of declining US dollar – improvement in all five Divisions
- Free Cash Flow before customer financing increased to € 1.1 billion
Order intake up to € 39.3 billion thanks to Airbus and
Military Transport Aircraft Division
EADS (stock exchange symbol: EAD) can rely on robust fundamentals and continued solidity in its underlying performance, but is still facing challenges on its recovery path. Despite a difficult economic environment and a weak US dollar, the Group continued to experience strong business momentum in the first quarter of 2008. The remarkable order intake reflects the capabilities of EADS' product portfolio on the global market, in particular at Airbus and Military Transport Aircraft Division. The Q1 2008 EBIT* development was supported by a temporary excess volume of matured hedges compared to the economic exposure. For the full year 2008, the Group confirms its EBIT* guidance of € 1.8 billion.
“Though many serious challenges have been overcome there remains much to do in order to secure the significant and lasting improvement in operational performance we are targeting. But first quarter results are encouraging in that respect,” said EADS CEO Louis Gallois. “Implementation and execution of Power8 is underway and we will look into further measures beyond. With regard to our long-term strategic plan Vision 2020, we have achieved first tangible successes: The US tanker selection and our recent acquisition in the US support us in our aim to balance both our global footprint and our business portfolio. We are determined to build on that encouraging start and are looking to make further advances in transforming our business.”
Airbus continued to ramp-up aircraft deliveries, mainly for the A320 Family. Singapore Airlines received further A380s. The Military Transport Aircraft Division achieved the A400M Power-On milestone. Eurocopter increased its deliveries, successfully unveiled its new EC175 transport helicopter and further expanded its international presence by opening an NH90 assembly line in Australia. The EADS Astrium-built Automated Transfer Vehicle successfully completed its mission to supply the International Space Station ISS. The Defence & Security Division enlarged its secure communications business through new orders and the acquisition of the North American emergency response solution provider PlantCML.
Revenues grew by 10 percent to € 9.9 billion (Q1 2007: € 8.9 billion), fuelled by higher Airbus deliveries (123 units incl. two A380s versus 115 aircraft in the same period of the previous year) and increased volumes at Eurocopter, EADS Astrium and Defence & Security. The Military Transport Aircraft Division contributed significantly to the growth thanks to a milestone revenue recognition in the A400M programme, which had been shifted from 2007.
EADS’ EBIT* (pre goodwill and exceptionals) for the first quarter 2008 reached € 769 million (Q1 2007: € 88 million). It benefited from improvements across all Divisions. Thanks to a strong operational performance and achievement of Power8 targets, Airbus and Defence & Security secured the largest EBIT* growth compared to the first quarter of 2007 when Airbus' EBIT* in particular was heavily burdened by Power8 restructuring. Additionally, in the first three months of 2008, Group EBIT* benefited from a temporary excess volume of matured hedges compared to the economic exposure, overcompensating a less favourable hedge rate compared to the same period of the previous year. The reverse effect will impact the upcoming quarters. In Q1 2008, a US dollar impact of around € -500 million on loss-making contract provisions put pressure on the Group's EBIT*, partly balanced out by a gain of around € 200 million from revaluations on liabilities. Compared to Q1 2007, the US dollar effects impacted EBIT* by € -360 million.
In line with the Group's EBIT* development, EADS improved its Net Income to € 285 million (Net Loss Q1 2007: € 10 million), or earnings per share of € 0.35 (loss per share Q1 2007: € 0.01). Self-financed R&D expenses remained roughly stable at € 534 million (Q1 2007: € 549 million), but are expected to grow over the full year mainly in the context of Airbus’ aircraft development programmes, especially for the A350 XWB.
Free Cash Flow before customer financing increased to € 1,059 million (Q1 2007: € -785 million) driven by improved cash flow from operations and reduced capital expenditure. The improvement in operating cash flow was mainly related to a stronger inflow of customer advance payments and additionally benefiting from a much lower build-up of inventories. Consequently, Free Cash Flow including customer financing improved to € 1,116 million (Q1 2007: € -822 million) including a stronger net contribution from sell-down of customer financing assets compared to a cash-out in the first quarter of 2007. In the first quarter of 2008, Cash Flow is significantly less impacted by capital expenditure, settlement payments and restructuring expenses than it will be over the rest of the year. At the end of March, the Net Cash Position reached € 8.3 billion (year-end 2007: € 7.0 billion).
In the first three months of 2008, EADS raised its order intake to € 39.3 billion (Q1 2007: € 10.5 billion) thanks to strong orders at Airbus and – with finalisation of the UK tanker programme FSTA and a tanker order from Saudi-Arabia – at Military Transport Aircraft. The Group benefited from a continuing demand for EADS' excellent products, mainly from Asia-Pacific and legacy carriers.
Up to the end of March 2008, the Group’s order book remained on a record level of € 351.5 billion (year-end 2007: € 339.5 billion). This growth was achieved despite a € -17 billion revaluation due to the weaker US dollar at the end of the first quarter. Orders within the commercial aircraft business are based on list prices. The Group further expanded its defence order book mainly thanks to its Military Transport Aircraft Division; defence order book closed the first quarter at € 58.0 billion (year-end 2007: € 54.5 billion). At the end of March, EADS had 116,375 employees (year-end 2007: 116,493).
EADS confirms the guidance for 2008 that was published on 11 March 2008.
The EADS guidance is based on a closing spot rate at year-end 2008 of € 1 = US$ 1.45.
EADS expects Airbus to capture above 700 aircraft orders in 2008.
EADS revenues are expected to exceed € 40 billion in 2008, with about 470 aircraft deliveries for the full year.
EADS expects its 2008 EBIT* at € 1.8 billion. While, in the first quarter, the strong underlying performance across businesses, particularly at Airbus, shows a satisfactory trend, EADS needs to balance it with challenges on key programmes this year.
The weakening of closing spot rate at year-end 2008 could have negative impacts on earnings linked to the revaluation at a deteriorated US dollar rate of some Airbus balance sheet items, including loss-making contract provisions.
Before the impact of customer financing, EADS expects 2008 Free Cash Flow at € 500 million (keeping in mind it is the most volatile item to predict). This includes the cash consideration for the acquisitions EADS announced lately. If the positive trend of the first quarter is confirmed, upside to this number is possible.
For the 2008 EBIT* guidance as well as for the mid-term outlook, any potential financial impact of the new A380 delivery schedule has not been determined so far.
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.
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