EADS reports loss on cost overruns for military and commercial planes programs
Paris-based European Aeronautic Defence & Space Co. said it lost euro1.05 billion ($1.44 billion) in the three months to December after booking charges of euro1.6 billion for the A400M military project and euro240 million for the A380 in the period. The loss compares to a euro490 million net profit a year earlier.
In the full year, the net loss of euro763 million compares to a net profit of euro1.57 billion in 2008.
EADS has been grappling with cost overruns and delays to its troubled military program and the A380, both of which are years late. In 2007, delays to the programs also led to a full year net loss.
EADS reached a last-ditch agreement with customer nations on Friday, who agreed to inject another euro3.5 billion (nearly $4.8 billion) into the A400M project, allowing it to continue.
In total, EADS has taken provisions of euro4.2 billion for the A400M, for which first delivery is scheduled for 2013. Canceling the project would have cost EADS euro5.7 billion.
EADS CEO Louis Gallois, who had threatened to halt the program if no deal was reached, said that the project is “now back on track.”
In the long term — over the next 20 years — Gallois said
Chief Financial Officer Hans Peter Ring said
On Tuesday, EADS shares were down 4.4 percent at euro15.19 in Paris afternoon trade.
Christophe Menard, an analyst with European investment bank Bryan, Garnier & Co., said investors are “worried about the A380 and the fact that difficulties continue in 2010.”
He also said underlying earnings disappointed because of cost inflation.
The company said it won’t pay a dividend this year to shareholders, including the French government and
EADS’ defense division suffered a setback Monday after American partner Northrup Grumman withdrew from a $35 billion contract to build refueling tankers for the Air Force, saying the Pentagon’s guidelines favor
Gallois said Tuesday that EADS won’t bid alone, and maintained that the A330 plane makes a better tanker than the
“We deeply regret that the
German Economy Minister Rainer Bruederle warned the situation had “signs of protectionism.”
But Gallois said the decision doesn’t change EADS’ intention to boost its presence on the American defense market.
EADS has said it wants to boost defense as a share of overall business, making it less reliant on the cyclical airlines business, which currently accounts for around two-thirds of its revenue.
It also wants to be more present in the dollar zone to avoid currency fluctuations, which hurt profits by euro2.5 billion in 2009 compared to 2008, EADS said.
Revenue fell 1 percent in 2009 to euro42.82 billion, a figure EADS expects to remain roughly stable in 2010.
“We are getting better visibility,” Gallois said, allowing
“It’s not euphoria,” said Gallois. But pricing should improve from “bottom of the swimming pool” levels in 2009, he said.
Earnings before interest and taxes, or EBIT, in 2010 will be around euro1 billion, the company said.
In 2009, EADS made an EBIT loss of euro322 million, compared to underlying earnings of euro2.83 billion a year earlier.
The net cash position is “solid” at euro9.8 billion, and EADS said it had to help customers with financing less than it expected last year.
Gallois said preserving cash is vital to protect its credit rating and pay development costs of the A350 XWB medium capacity, long-range plane — designed to compete with
Fitch analyst Tom Chruszcz said the A400M agreement reduces the risk he might have the downgrade his rating on the company.
“The removal of doubt pertaining to the continuation of the program outweighs the financial consequences of the deal,” he said in a statement.