UPDATE 4-Airbus maker EADS closes merger saga as profit leaps
* 2012 revenue rises 15 pct to 56.5 bln euros
* Operating profit up 68 pct at 3 bln euros
* Targets 2013 operating profit of 3.5 bln euros
* Shares climb 6.5 pct to record close (Adds talks with French prime minister, CEO comments, analyst comment, closing shares, industry background)
By Tim Hepher and Cyril Altmeyer
BERLIN, Feb 27 (Reuters) - Airbus parent EADS formally buried its attempted $45 billion merger with UK defence contractor BAE Systems Plc and cheered investors with evidence that civil aviation growth continues unabated.
Shares in Europe's largest aerospace company reached a record high on Wednesday after it unveiled higher than expected 2012 earnings and raised its dividend despite charges at its defence and helicopter operations.
Chief Executive Tom Enders said he was "comfortable" with defence providing only 20-25 percent of overall group revenue, rather than the long-targeted equal split that would have resulted from a deal with BAE, which fell apart late last year.
Investors had largely opposed the deal because it would have diluted their exposure to strong demand from airlines in emerging markets - a rare bright spot in an otherwise bleak climate for industrial goods made in Western economies.
While European arms spending has been hit hard by budget cuts, passenger jet production has largely ridden out the economic crisis thanks to brisk civil demand led by Asia.
"Maybe it is not a bad time to have a smaller rather than larger defence business," Enders told a news conference.
Strategy chief Marwan Lahoud told Reuters that the BAE deal was now "off the table", dismissing lingering speculation that EADS was still harbouring hopes of reviving the deal.
EADS, which makes drones, fighter jets and missiles, will study defence activities and potentially stop some of them if they fail to meet the group's criteria, he said in an interview.
But he emphasized that EADS remained in the defence business, which experts typically see as a hedge against civil cycles and a source of cash to finance new plane projects.
EADS operating profit rose 68 percent to 3 billion euros ($3.92 billion) in 2012 for an operating margin of 5.3 percent on revenue up 15 percent to 56.5 billion euros.
Net profit grew 19 percent to 1.2 billion. Analysts had forecast EADS revenue of 54.88 billion euros and net income of 1.475 billion, according to Thomson Reuters I/B/E/S data.
For 2013 it targeted 3.5 billion euros in operating profit and earnings per share of 2.5 euros, up from 2.24 euros, before a planned share buyback linked to a shake-up of shareholdings.
EADS stock rose 6.5 percent to its highest-ever close of 37.14 euros, helping France's blue-chip CAC 40 index gain 2 percent.
"The market is in a generous mood towards EADS," said London-based Agency Partners analyst Nick Cunningham.
"It likes risky cyclicals now, and the (share) buyback adds about 15 percent to earnings in a full year. It is an earnings-driven equities market right now."
However, he warned an extended civil aerospace cycle was finally running out of steam and other risks had not gone away.
Airbus has also bounced back from the discovery a year ago of wing cracks inside the A380 superjumbo, with the spotlight falling instead on Boeing Co, which is wrestling with battery problems on its grounded 787 Dreamliner.
EADS said it had largely absorbed the costs of fixing the A380, the world's largest airliner. Any further potential one-off costs should be limited mainly to its next big project, the A350, which it continued to describe as "challenging".
But a slowdown in A380 deliveries as Airbus switches to a permanent fix for cracked wing "rib feet" - which had shortened the anticipated life of parts but did not lead to grounding - means EADS is predicting only "moderate" 2013 sales growth.
EADS reaffirmed plans to fly the A350, Europe's response to the 787, this summer. The first airframe, minus its engines, left the assembly line in France on Tuesday for outdoor tests.
Airbus is looking at a second A350 assembly line matching Boeing's double 787 production system but has yet to make a decision, Chief Financial Officer Harald Wilhelm said.
Airbus' top salesman aired the plan last week, confirming a Reuters report in October that Airbus may hike output as a new battle looms over lucrative "mini-jumbo" sales.
The location of any new line has not been decided but is likely to test Enders' ambitions to run EADS as a "normal" company free of interference. France and Germany lobbied to host the first facility, recently opened in Toulouse.
EADS remains locked in a two-year-old dispute with Berlin about a 1.2 billion-euro development loan for the A350, half of which is unpaid as the two sides quarrel over the conditions.
Investors have so far responded positively to a sweeping reorganisation of the company's complex public and private shareholdings, triggered by the collapse of the BAE deal.
France and Germany continue to own stakes, but a higher proportion of shares will be held by ordinary investors and the management says that it will be given a virtually free hand.
EADS has already won the first round by imposing its choice of chairman over a candidate preferred by the French government.
After flying to Paris to meet French Prime Minister Jean-Marc Ayrault late on Wednesday, Enders said they had held "good and constructive" talks on subjects including the board, but not the unsuccessful government-backed bid of Anne Lauvergeon.
Despite Wednesday's gains, Enders also said EADS had to do more to achieve a targeted operating margin of 10 percent in 2015, broadly on a par with Boeing. The U.S. company has long outstripped Airbus on this score - blurred by accounting differences that allow it to defer the impact of 787 outlays.
Boeing recently posted fourth-quarter results above expectations, thanks largely to its ability to speed up jet production and keep down costs.
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