• Order intake of € 30.8 billion signals commercial aircraft momentum
• Airbus to increase Single Aisle production rate to 40 per month
• Stable revenues of € 20.3 billion
• EBIT* before one-off at € 0.6 billion
• EBIT* of € 406 million
• Net income: € 185 million
• Net Cash at € 8.9 billion remains key asset
EADS’ (stock exchange symbol: EAD) macro-economic and commercial environment continues to improve while challenges remain, particularly in the institutional sector. Revenues stood at € 20.3 billion. The EBIT* before one-off of € 0.6 billion benefited from good performance in Airbus legacy programmes and other business activities. EADS’ EBIT* amounted to € 406 million after exceptional foreign exchange effects. The order intake of € 30.8 billion mirrors the improved momentum in commercial aviation. EADS’ order book of more than € 454 billion provides a solid platform for future deliveries. The Group’s Net Cash position of € 8.9 billion remains a key asset.
“Berlin and Farnborough Air Show orders reflect an improvement in the commercial aviation market. I am particularly glad to see the return of aircraft lessors. However, the institutional outlook is more challenging as public budgets in our domestic markets are under tight review”, said Louis Gallois, CEO of EADS. “Our key priorities remain clear: improving efficiency on the A380 production, developing the A350 and finalising the A400M contract amendment with the Customer Nations. I want to add that we have submitted our bid for the U.S. Air Force tanker programme and that we will fight hard to win the competition again.”
In the first six months, EADS’ revenues remained stable at € 20.3 billion (H1 2009: € 20.2 billion). Deliveries at Airbus Commercial (250 units) and Eurocopter (249 helicopters) remained roughly stable at a high level.
The percentage of completion methodology was resumed on the A400M programme. In the second quarter, based on the allocation of internal milestones, around € 300 million in revenues were booked on the programme. Customer Nations and EADS continue working towards a contract amendment. In the meantime, the A400M flight test programme is progressing better than expected; however, the development of the Flight Management System is on the critical path, with more challenges than expected. Risk mitigation actions are being undertaken. Management assumptions of March 2010 underpinning the A400M provision calculation remain valid. As previously indicated, reassessment of these assumptions could have a significant impact on future results.
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 € 0.6 billion (H1 2009: € 1.3 billion) for EADS and around € 0.3 billion for Airbus. It benefited from good performance in Airbus legacy programmes and other business activities. As expected, the A380 continues to weigh significantly on the underlying performance. Compared to H1 2009, EBIT* before one off was weighed down by the deterioration of hedge rates and higher investment in Research & Development.
EADS’ reported EBIT* of € 406 million (H1 2009: € 888 million) was further weighed down mainly by exceptional negative foreign exchange impacts. EADS has further refined its natural hedging strategy in line with IFRS, impacting reported EBIT* and other financial result but with no impact on EBIT* before one-off and net income. Exchange rate impacts weighed on the H1 2010 reported EBIT* by around € 550 million compared to H1 2009.
Net Income amounted to € 185 million (H1 2009: € 378 million), or earnings per share of € 0.23 (earnings per share H1 2009: € 0.47). The interest result reflects the decline in interest rates on the financial markets. The other financial result improved considerably by around € 270 million year on year. This line includes the positive revaluation of the Group’s U.S. dollar and GBP cash assets.
Self-financed Research & Development (R&D) expenses grew to € 1,301 million (H1 2009: € 1,172 million), driven by increases in Airbus due to a ramp up in A350 XWB activity as well as a rise in product investment at Defence & Security and Eurocopter.
Free Cash Flow before customer financing of € -470 million (H1 2009: € -948 million) reflects a lower deterioration in working capital but the decrease in EBIT* before one-off. Change in working capital amounted to € -815 million (H1 2009: € -1,898 million). The change in working capital reflects, as anticipated, an increase in inventories, mainly at Airbus although at a much lower level than in the first half year of 2009. H1 2009 included a ramp up on the A380 production but a low level of A380 deliveries as well as a mismatch between production and delivery rates on both single aisle and long range aircraft in the period. The inflow of advances linked to Airbus commercial activity is higher than one year ago, representing an increase in commercial aircraft orders. Some payment delays in the defence and institutional business were compensated by government receipts for development programmes. Customer financing needs for the first half reached around € 270 million.
Free Cash Flow after customer financing amounted to € -737 million (H1 2009: € -1,169 million).
EADS’ Net Cash position of € 8.9 billion (year-end 2009: € 9.8 billion) continues to provide a solid foundation for the Group’s operational needs as well as future growth. It reflects the Free Cash Flow consumption of the first half year as well as a € 300 million contribution to the pension fund assets.
The order intake of EADS significantly increased to € 30.8 billion compared to one year ago (H1 2009: € 17.2 billion) due to higher commercial aircraft orders. This does not include orders booked at Farnborough Air Show. By the end of June 2010, EADS’ order book stood at € 454.5 billion (year-end 2009: € 389.1 billion), reflecting increases at Airbus and Astrium. The Airbus Commercial order book benefited from a positive revaluation impact of around € 56 billion due to the closing spot rate of the U.S. dollar that has significantly strengthened since year-end. The defence order book amounted to € 56.6 billion (year-end 2009: € 57.3 billion).
The strengthening of the dollar, if sustained, will improve profitability beyond 2012. In the short term, EADS’ net exposure is almost fully hedged. At the end of June 2010, the mark-to-market value of the Group’s hedge portfolio at the closing spot rate is a negative € 4.2 billion net of tax, impacting equity.
These negative effects on equity will reverse as current hedges expire and/or the dollar further weakens. During the second quarter of 2010, EADS invested in foreign exchange options as well as forward contracts. Options consume less hedging capacity while allowing for a potential upside from more favourable rates.
In case of a drastic strengthening of the U.S. dollar against the euro, the size of the hedge portfolio and the volatility of the financial markets could limit the availability of long term hedging capacity using forward contracts and could weigh further on equity.
At the end of June 2010, EADS’ workforce consisted of 120,038 employees
(year-end 2009: 119,506).
EADS’ guidance is based on an assumption of €1 = $1.35 for the H2 average and December closing spot rates.
The Group is increasing its guidance for orders, revenues, underlying profitability and free cash-flow.
Given the recent commercial success at Farnborough and the number of on-going campaigns, Airbus has increased its full year target for gross orders to above 400. Single aisle production rates will go up to 36 a month at the end of this year, to 38 in Q3 2011 and to 40 a month in Q1 2012.
On the other hand, the civil helicopter market and its related order stream are expected to be sluggish in H2 2010. At this stage, no significant impact is expected in 2010 from the pressure on institutional and defence budgets.
Airbus deliveries should be around 500 aircraft for the full year 2010. Eurocopter deliveries will be slightly below the last year.
Using these exchange rates and delivery assumptions, EADS revenues should increase to more than € 44 billion.
Thanks to a higher number of expected deliveries and an upside to the group’s underlying profitability, EADS EBIT* before one-off should reach around € 1.2 billion in 2010. At Airbus, H2 EBIT* before one-off will be lower than in H1. Compared to H1, the positive impact of higher volumes and better pricing will be more than offset by higher R&D and the deterioration of hedge rates compared to the first half of the year.
Going forward, the EBIT* performance of EADS will be dependent on the Group’s ability to execute on the A400M, A380 and A350 XWB programmes, in line with the commitments made to its customers. At €1 = $1.35, EADS maintains its EBIT* guidance of around € 1 billion despite the negative exceptional impacts from foreign exchange accrued in H1.
EADS is also improving its free cash flow guidance. Provided a sustainable year-end cash inflow of institutional and government business and subject to pre-delivery payment advances for the A400M programme, the Free Cash Flow before customer financing should be break even. Free cash-flow after customer financing should be negative due to customer financing cash-outflows of around € 600 million.
EADS Divisions: Upturn in commercial aircraft market; challenging institutional business environment
Airbus’ consolidated revenues of € 13,853 million stood stable compared to the same period last year (H1 2009: € 13,951 million). The Airbus consolidated EBIT* amounted to € 104 million (H1 2009: € 519 million).
Airbus Commercial revenues amounted to € 12,965 million (H1 2009: € 13,204 million). Deliveries stood roughly stable at 250 commercial aircraft (H1 2009: 254 aircraft). Compared to one year ago, Airbus Commercial revenues reflect lower volumes but a favourable mix effect which includes a higher number of A380 deliveries. The negative impact from foreign exchange is around € 800 million. Airbus Commercial EBIT* decreased to € 241 million compared to € 737 million in H1 2009. It includes a small pricing improvement net of escalation in the second quarter. Negative foreign exchange effects weighed on the EBIT* by around € 500 million versus one year ago and R&D increased driven by a ramp up in investment on the A350 XWB programme. The A350 XWB programme development is progressing but remains challenging. In addition, the A380 continues to weigh significantly on the underlying performance, as expected.
Airbus Military revenues increased to € 1,007 million (H1 2009: € 855 million), benefiting from an increase in volume from both Tanker activity and Medium & Light (M&L) deliveries. A series of internal milestones have been established on the A400M programme as part of the return to the percentage of completion methodology. Three revenue milestones were passed during the second quarter, which have triggered revenues of around € 300 million. Airbus Military EBIT* amounted to € -161 million (H1 2009: € -218 million, weighed down by the A400M provision). It includes the currency revaluation impact in the A400M provision and an under-recovery of fixed costs on the A400M programme amounting in total to € -176 million.
In the first six months, Airbus Commercial booked 117 firm net commercial aircraft orders. During this period, it registered 14 aircraft cancellations compared to 22 in the first half of 2009. Until the end of June, Airbus Commercial delivered 250 aircraft including seven A380 and five Single Aisle aircraft under operating lease. These five Single Aisle aircraft do not count for revenue and margin recognition. Airbus Military registered two new C-295 military aircraft orders for Mexico in the second quarter. Until the end of June, Airbus Military delivered nine aircraft.
Lufthansa received its first A380 in May. During ILA Berlin Air Show in June, Airbus won commitments worth $ 15.3 billion, including orders for an additional 32 A380s for Dubai-based Emirates Airline.
With 133 firm aircraft orders and 122 memoranda of understanding (MOU) the Farnborough Air Show in July has been a great success for Airbus.
The total value of the 255 commitments received was $ 28 billion and confirms a clear upturn in aircraft demand, supported by emerging countries and lessors returning to the market. This drove the decision to increase the Airbus Single Aisle production rate.
At Airbus Military, the A400M flight test programme is progressing better than expected; however, the development of the Flight Management System is on the critical path, with more challenges than expected. Risk mitigation actions are being undertaken. In addition, the A330 Multi Role Tanker Transport (MRTT) is making rapid progress towards certification and the first delivery to its launch operator, the Royal Australian Air Force, is planned for the fourth quarter of 2010. Two aircraft are now flying; five additional aircraft are undergoing conversion. The reliability and performance of the various refuelling devices has been validated in more than 1,000 dry and wet contacts involving a wide range of aircraft during day and night-time.
As of 30 June 2010, Airbus’ consolidated order book was valued at € 405.0 billion (year-end 2009: € 339.7 billion). Airbus Commercial accounted for € 385.7 billion (year-end 2009: € 320.3 billion) which equals 3,355 units (year-end 2009: 3,488 aircraft) -after a positive revaluation impact of around € 56 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 € 20.8 billion (year-end 2009: € 20.7 billion).
In the first six months of 2010, revenues for Eurocopter grew by 11 percent to € 2,109 million (H1 2009: € 1,908 million). This growth was driven by higher volume, favourable phasing of support revenues and milestone progress on the Korean Utility Helicopter (KUH). The Division’s EBIT* decreased to € 71 million (H1 2009: € 99 million). The positive contribution from those higher revenues was weighed down by a restructuring charge of € 40 million booked in the second quarter linked to the implementation of the SHAPE programme, a charge and margin adjustment on the NH90 programme as well as higher product investment.
In the second quarter, the first NH90 NFH (naval variant) were delivered to France and the Netherlands. Delivery of the first two NH90 TTH to Oman was also achieved on time, making Oman the 8th customer to receive the NH90. Eurocopter released two new versions of its EC145 helicopter: the EC145 “Mercedes-Benz Style”, a special edition including a high-end VIP interior developed together with Mercedes-Benz, and the EC645, a militarised version of the EC145.
The trend of bookings over the first six months was stable with 140 net orders registered compared to 138 in H1 2009. The cancellation trend is slowing, with 27 helicopters in H1 2010 compared to 59 a year earlier. However, the commercial market remains uncertain with demand still far below 2007/2008 levels. Deliveries in the first six months totalled 249 helicopters including 13 NH90/ Tiger. Progress is being made on the NH90 programme. Eurocopter’s order book stood stable at € 14.7 billion (year-end 2009: € 15.1 billion) with 1,194 helicopters (year-end 2009: 1,303 helicopters).
Astrium revenues in H1 2010 amounted to € 2,110 million (H1 2009: € 2,194 million), reflecting a positive contribution from defence activities and telecommunication services. However, in the second quarter 2009, Astrium booked a one-time catch-up effect for commercial telecommunications satellites of around € 200 million that is not compensated this quarter.
EBIT* improved by 7 percent to € 106 million (H1 2009: € 99 million), thanks to increased productivity and ramp-up in defence activities as well as growth in military telecommunications services, partially reduced by lower volume in earth observation services.
Astrium recorded a historic quarter with Ariane 5 marking its 37th successful launch in a row and with the launch of seven Astrium-built satellites in the first half year, of which six in only one month between May and June. Commercial momentum also continues with two new commercial satellite orders in the quarter from Eutelsat Communications and SES WORLD SKIES. Both satellites are based on Astrium's Eurostar E3000 platform. Two earth observation satellites were booked for Kazakhstan.
Astrium’s order intake amounted to € 2.7 billion for H1 2010. Order momentum continued from both commercial and institutional customers. However, it was significantly lower than in H1 2009 (€ 6.4 billion) which included the Ariane 5 PB batch of 35 launchers. At the end of June 2010, the order book for Astrium amounted to € 15.5 billion (year-end 2009: € 14.7 billion).
The Defence & Security (DS) Division’s H1 2010 revenues of € 2,183 million stood stable compared to the previous year (H1 2009: € 2,161 million). Revenues reflect higher volume from core and export in Eurofighter and Missile programmes but a lower volume of service activities. EBIT* amounted to € 110 million (H1 2009: € 143 million). This reflects significant growth in self-funded R&D which is focused mainly on the Unmanned Aerial Systems (UAS) and secure communication segments. EBIT* pre R&D is stable.
DS continued to expand its global network in the second quarter, forming several strategic alliances: with RUAG of Switzerland to co-operate in international programmes such as the Eurofighter including Maintenance, Repair and Overhaul, design, development and manufacturing; with Odebrecht in Brazil to create a local Brazilian industrial base and with Atlas Elektronik to create Sofrelog Atlas Maritime Security, a leading global provider of maritime safety and security solutions. In addition, DS delivered in the UAS segment, with the EuroHawk – built by Northrop Grumman and DS – successfully completing its first flight.
At the end of June 2010, the Division’s order book was stable at € 18.5 billion (year-end 2009: € 18.8 billion). It provides a solid platform for future deliveries. Order intake for the first half of 2010 reached € 1.9 billion and includes an order for Eurofighter Integrated Logistic Support in the second quarter.
Headquarters and Other Businesses (not belonging to any Division)
Revenues of Other Businesses increased by 15 percent to € 554 million (H1 2009: € 480 million). This increase was driven by higher deliveries and asset management activity at ATR as well as by a ramp up in Light Utility Helicopter (LUH) deliveries at EADS North America. EBIT* of Other Businesses amounted to € 0 million (H1 2009: € 2 million). The deterioration is mainly explained by negative foreign exchange impacts at ATR.
ATR delivered 27 aircraft in the first six months (H1 2009: 21 aircraft) and received orders for 11 units (H1 2009: 12 units). No cancellations were registered. The 2010 delivery outlook remains stable, with a lower production rate as expected. While the market is improving with 31 orders and 30 options booked at the Farnborough Air Show, the financing environment remains difficult. At the end of June 2010, ATR’s order book stood at 117 aircraft.
In early July, EADS North America submitted its proposal as prime contractor for the U.S. Air Force tanker modernisation programme. The U.S. Department of Defense has clearly stated that EADS North America is a qualified provider and capable of executing all prime contractor responsibilities, including classified work.
The successful ramp-up on the LUH programme continues. All helicopters have been delivered on time or ahead of schedule. Together with its industrial team of American Eurocopter and Lockheed Martin, EADS North America will build three Armed Aerial Scout (AAS) 72X Technology Demonstration aircraft for the U.S. Army’s Armed Aerial Scout mission, which is to provide aerial reconnaissance and security during combat operations. The AAS-72X is derived from the UH-72A Lakota Light Utility Helicopter, which is widely considered as one of the most successful acquisition programmes in the U.S. Army’s history. On 30 June 2010, the order book of Other Businesses remained stable at € 2.0 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, Eurocopter, EADS Astrium and EADS Defence & Security – generated revenues of € 42.8 billion and employed a workforce of more than 119,000.
Notes to the editors:
Live-Transmission EADS Analysts Conference Call on the Internet
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Q2 2010 revenues were roughly stable compared to Q2 2009. The increase in Airbus Military revenue is linked to the revenue recognition of the A400M milestones as well as higher Tanker and M&L activity. Eurocopter revenues increased 14% thanks to higher volume and a better mix. Astrium revenues were lower because Q2 2009 revenues included a one-time catch up effect for in orbit incentives on telecommunication satellites.
EBIT* decreased in Q2 2010 to € 323 million compared to € 656 million in the previous year. At Airbus, EBIT* dropped to € 97 million (Q2 2009: € 430 million) mainly due to deterioration of hedge rates, lower volume and higher R&D. Airbus Military was less impacted by one-off charges on the A400M. Q2 2010 EBIT* at Astrium and Other Businesses stood stable while decreasing at Defence & Security by 27 percent due to higher R&D and unfavourable phasing of SG&A.
At Eurocopter, the EBIT* in Q2 2010 of € 45 million (Q2 2009: € 61 million) includes restructuring and NH90 charges, partly compensated by activity ramp up on KUH. Headquarters EBIT* improved since Q2 2009 EBIT* was weighed down by real estate costs.
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 half year and the second quarter of 2009 are now shown in detail and Airbus Military’s EBIT* for the half year and the second 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 – H1 2010 Results (reviewed)
(Amounts in Euro)
EADS – Second Quarter Results (Q2) 2010
(Amounts in Euro)