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EADS posts loss, drops profit target
November 8, 2007 / 6:28 AM / 10 years ago

EADS posts loss, drops profit target

FRANKFURT/PARIS (Reuters) - EADS on Thursday posted steeper than expected third-quarter losses, axed forecasts that it would make a 2007 operating profit and promised to reinforce restructuring plans after fresh problems at planemaker Airbus.

EADS reported a third-quarter operating loss of 710 million euros and a quarterly net loss of 776 million euros after a 1.37 billion euro group-wide charge related to delays and cost overruns on the A400M military aircraft program.

Revenues at Europe’s largest aerospace group were better than expected, however, at 9.274 billion euros.

Analysts were on average looking for revenue of 8.1 billion euros, an operating loss of 382 million and a net loss of 196 million, according to Reuters Estimates.

EADS, which has also been battling delays to its A380 superjumbo and a weaker dollar, said it expected its full-year earnings before interest and tax to “roughly break even”.

It had previously predicted “roughly stable” 2007 group EBIT before goodwill and exceptional items and non-Airbus EBIT close to 1 billion euros before any A400M impact.

In 2006, EADS posted a group EBIT of 399 million euros.

The company had braced investors earlier this week for charges relating to the A400M airlifter, built for seven European NATO nations, which has slipped 6-12 months behind schedule.

The project is being spearheaded by EADS subsidiary Airbus, which is in the midst of plans to shed 10,000 jobs and sell around six factories as part of its Power8 restructuring designed to help it catch up with a resurgent Boeing.

Airbus will absorb 1.1 billion euros of the A400M charges.

EADS gave the first formal indication on Thursday that the plans, which have rattled European governments and stirred union anger, would have to be beefed up as the dollar hits new lows.

The plans were drawn up on the basis of a euro at $1.35 but the European currency is now worth more than $1.46 after hitting a record low overnight. Airbus competes with Boeing for plane orders denominated in dollars but reports its results in euros.

“The sliding trajectory of the U.S. dollar confirms the necessity to implement and to reinforce Power8 with additional measures,” EADS chief executive Louis Gallois said. “There is no way around additional efficiency measures to ensure EADS’s long-term competitiveness,” he added in a statement.

EADS did not say whether the new measures would lead to extra job cuts, but said it had reached labor agreements with unions on existing plans which would be implemented.

“Airbus is progressing in the process of selecting long-term partners for several sites,” EADS said with its results.

The group said revenues would decrease “very slightly” in 2007 based on an unchanged assumption of 440-450 Airbus deliveries, but now based on a euro at $1.40.

EADS had previously predicted 2007 revenues declining by a “low single-digit” percentage on the basis of a euro at $1.35.

EADS now says free cash flow could exceed 1 billion euros in 2007 and will at least be positive, having previously only predicted positive free cash flow following a strong Paris Air Show.

Reporting by James Regan, Tim Hepher; editing by Paul Bolding

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