EADS Q3 dips, stays cautious on FY
EADS
EADS beat forecasts with earnings before interest and tax (EBIT) of 201 million euros ($301 million) for the third quarter, but said it would not issue full-year guidance, citing uncertainty over the magnitude of potential charges for the high-profile and much-delayed A400M and A380 programs in the fourth quarter.
EADS shares rose on Monday morning, as investors welcomed positive news on cash consumption at Europe's largest aerospace group. By 0900 GMT shares were up 1.41 percent at 13.34 euros. The CAC-40 index <.FCHI> was 0.66 percent higher.
Analysts said the company's cash position was a positive surprise. The group's net cash position stood at 8.1 billion euros at the end of the third quarter, unchanged since the end of the first half. The company's cash performance is fabulous; they deserve an enormous amount of credit for that, said RBS analyst Sandy Morris.
CURRENCY FEARS
But the group will be facing a big currency headwind in 2010, Morris warned, and the market may not have taken on board the likely impact of the weakening dollar on EADS in 2010, Morris said.
EADS said on Monday that the continuous weakening of the dollar was challenging its performance because of a weakening hedge book over time, although it insisted that its long-term hedging policy meant the dollar did not pose a short-term threat.
Aircraft are traditionally priced in dollars, which makes life difficult for EADS and its planemaking unit Airbus, whose manufacturing base is in Europe.
EADS said on Monday that oil price increases and the wider economic environment created a risk for commercial aircraft customers.
Nevertheless, the group is cautiously envisaging an improvement of the economic and market conditions in the next months.
EADS maintained its estimate of up to 300 gross aircraft orders in 2009 and said it expected to deliver around 490 aircraft this year. It said it was still working with customers to establish a delivery target for 2010, including the A380 superjumbo program.
EBIT before one-offs, which EADS says gives an underlying flavor of the business by excluding one-off charges caused by provisions or foreign exchange impacts, reached 381 million euros in the third quarter, compared with a forecast of 296 million euros.
The company said increased volumes and savings linked to its Airbus Power8 cost-cut plan were not enough to compensate for worsening hedge rates, increased cost and falling prices on aircraft deliveries.
EBIT for the first nine months -- at 1.089 billion euros, compared with 2.018 billion euros last year -- was hit by foreign exchange impact, EADS said.
The group said third-quarter EBIT last year had been supported by 965 million euros from the revaluation of loss-making contract provisions at the closing spot rate.
The Airbus parent took a further 224 million euros in provisions in the first nine months of 2009 for delays to its A400M military transport project, on top of the 2.3 billion euros already booked.
EADS is taking minor provisions each quarter pending a contract renegotiation that could lead to a final assessment of its losses on the troubled defense deal, expected later this year. At the half-year stage it also warned of charges in the second half on the A380, whose production costs are over budget.
Group revenues slid 2 percent to 9.528 billion euros in the third quarter, and the group posted a net loss of 87 million euros, EADS said in a statement.
($1=.6677 euros)
(Reporting by Helen Massy-Beresford and Matthias Blamont, editing by Mike Nesbit and Jon Loades-Carter)
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