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EADS achieved robust financial results in the first nine-months of 2012. Order intake in the first nine months reached € 50.4 bn driven by solid order activity at Eurocopter, Astrium, Cassidian and Airbus Military and ongoing momentum at Airbus Commercial. At the end of September, EADS’ order book stood at € 547.5 bn showing resilience and providing visibility in the current macro environment. Revenues amounted to € 37.3 bn. The EBIT* before one-off of around € 1.9 bn benefited from a strong underlying performance.
The reported EBIT* amounted to € 1.6 bn, significantly above the 2011 level. The Net Cash position amounted to € 8.1 bn.
“Our performance over the first nine months shows double-digit revenue growth and a strong increase in profitability. The latter reflects, not least, our continued focus on programme management and execution,” said Tom Enders, CEO of EADS. “However, we will not run out of operational challenges anytime soon, especially at Eurocopter and Airbus. And for the rest of the year, we’ll put strong emphasis on cash generation. Aircraft deliveries are key.”
In the first nine months of 2012, EADS’ revenues increased 14 percent to € 37.3 bn (9m 2011: € 32.7 bn) driven by growth across all Divisions. The newly acquired companies in 2011 contributed around € 1 bn to this growth. Until the end of September, physical deliveries continued to be at a high level with 405 aircraft at Airbus Commercial and 300 helicopters at Eurocopter. In September, Astrium achieved the 51st consecutive successful Ariane 5 launch.
EBIT* before one-off – 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 around € 1.9 bn (9m 2011: around € 1.1 bn) for EADS and at around € 1.2 bn for Airbus (9m 2011: around € 0.4 bn). The increase compared to the same period last year is driven by operational improvement at Airbus Commercial including favourable volume and better pricing. Astrium’s growth is driven by productivity improvements and the integration of Vizada. In Eurocopter, despite an unfavourable product mix in the third quarter and higher Research & Development expenses, EBIT* before one-off is stable. As expected, Cassidian’s 2012 profitability is impacted by the business transformation and globalisation.
During the first nine months of 2012, EADS accelerated its hedge activity and implemented $ 27 bn of new hedge contracts at an average rate of € 1 = $ 1.29, which enhances the stability of the Group’s financial performance. At the end of September, EADS’ total hedge portfolio stood at $ 86.4 bn.
EADS’ reported EBIT* increased by 82 percent to € 1,615 mn (9m 2011: € 885 mn), driven by the improvement of the EBIT* before one-off.
In the first nine months of 2012, the dollar mismatch and balance sheet revaluation had a positive impact on the EBIT* of around € 70 mn.
The A350 XWB charge of € 124 mn is unchanged compared to H1 2012 as Airbus progresses within the amended schedule, which was communicated in July. However, the programme remains challenging.
Airbus is progressing, as planned, on the A380 wing rib technical fix development. The total charges recorded so far in 2012 amount to € 0.2 bn. Airbus still targets 30 A380 deliveries for 2012 which means the total charge for the A380 wing rib feet is still expected to reach around € 260 mn for the full year.
Following the Hawker Beechcraft (HBC) decision to shut down all their jet lines and despite EADS’ efforts to actively seek an acquirer for HBC as a whole including jets, the programme closure has resulted in an exceptional charge of € 76 mn in the third quarter.
Net Income rose sharply to € 903 mn (9m 2011: € 421 mn), or earnings per share of € 1.10 (earnings per share 9m 2011: € 0.52). The Net Income* before one-off(4) increased to € 1.1 bn (9m 2011: € 607 mn) in line with the strong underlying performance.
The finance result amounted to € -337 mn (9m 2011: € -212 mn). The interest result of € -237 mn (9m 2011: € -9 mn) deteriorated compared to the 2011 level, mainly due to lower interest income reflecting the evolution of interest rates. In addition, the 2011 interest result benefited from a positive one-time release of € 120 mn due to the termination of the A340 programme.
The other financial result of € -100 mn (9m 2011: € -203 mn) includes an improved impact from a foreign exchange revaluation compared to 9m 2011. This line also includes the unwinding of discounted provisions.
Self-financed Research & Development (R&D) expenses remained broadly stable at € 2,145 mn (9m 2011: € 2,151 mn).
Free Cash Flow before acquisitions amounted to € -3,235 mn (9m 2011: € 587 mn). Operational performance improved significantly compared to the same period last year. However, it is weighed down by a significant temporary deterioration in working capital which reflects the back-loaded delivery pattern and the significant industrial ramp up efforts, especially at Airbus and Eurocopter. In addition, government payment profiles and milestone achievements are back-loaded, particularly at Cassidian.
In the first nine months of 2012, low customer financing support of € -97 mn had been provided, demonstrating continuing appetite for asset-based financing and continued Export Credit Agency support for deliveries.
The level of capital expenditure continued to increase, mainly at Airbus driven by A350 XWB as well as Single Aisle and Long Range rate increases. It includes a capitalisation of development costs, mainly for the A350 XWB programme.
The Q4 cash flow should reflect the reversal of working capital requirements driven by deliveries and payments from institutional customers.
Free Cash Flow after customer financing amounted to € -3,376 mn (9m 2011: € 155 mn).
The Net Cash position of EADS amounted to € 8.1 bn (year-end 2011: € 11.7 bn), also reflecting a cash contribution to pension assets of € 331 mn as well as the dividend payment of around € 370 mn.
EADS’ order intake amounted to € 50.4 bn (9m 2011: € 93.9 bn). and was encouraging across all Divisions. The 9m 2011 order intake included exceptional orders booked at Paris Air Show, particularly for the A320neo.
At the end of September 2012, the Group’s order book stood at € 547.5 bn (year-end 2011: € 541.0 bn), providing a solid platform for future growth.
The defence order book amounted to € 51.1 bn (year-end 2011: € 52.8 bn).
At the end of September 2012, EADS’ workforce consisted of 137,415 employees, (year-end 2011: 133,115).
As the basis for EADS’ 2012 guidance, EADS expects the world economy and air traffic to grow in line with prevailing independent forecasts and assumes no major disruption due to the current euro crisis.
As EADS’ nine-month results confirm its growth and improvement trend, the Group reaffirms with increased confidence its 2012 earnings guidance.
In 2012, Airbus should deliver around 580 commercial aircraft, including 30 targeted A380 deliveries.
Gross orders should be above the number of deliveries, in the range of 600 to 650 aircraft.
Based on an assumption of € 1 = $ 1.30, EADS 2012 revenues should grow in excess of 10 percent.
Based on the Group’s solid underlying operating performance, EADS expects 2012 Group EBIT* before one-off to be around € 2.7 bn.
As a result and with an expected tax rate for the full year of slightly below 30 percent, the EADS 2012 EPS* before one-off(4) should be around € 1.95 (FY 2011: € 1.39).
Going forward, the reported EBIT* and EPS* performance of EADS will be dependent on the Group’s ability to execute on its complex programmes such as military helicopters, A400M, A380 and A350 XWB, in line with the commitments made to customers. Reported EBIT* and EPS* also depend on exchange rate fluctuations.
Based on the targeted 30 A380 deliveries and assuming no change in government payment behaviour, EADS aims to be Free Cash Flow break-even after customer financing and before acquisitions.
EADS Divisions: Continued commercial momentum at Airbus, healthy order intake at Eurocopter, Astrium and Cassidian
Airbus’ consolidated revenues increased by 14 percent to € 25,621 mn (9m 2011: € 22,411 mn). The Airbus consolidated EBIT* rose by 184 percent to € 837 mn (9m 2011: € 295 mn).
Airbus Commercial revenues amounted to € 24,725 mn (9m 2011: € 21,120 mn). Compared to one year ago, Airbus Commercial revenues benefited from favourable volume, mix and pricing effects. A total of 403 deliveries were booked with revenue recognition compared to the 405 physical deliveries as 2 aircraft were placed on operating lease.
Airbus Commercial EBIT* before one-off increased significantly to € 1.15 bn (9m 2011: around € 380 mn). It benefitted from better operational performance including favourable volume and pricing, net of escalation. There was a small tailwind from the appreciation of the US dollar rate of the Group’s maturing hedges to the end of September.
Airbus Commercial reported EBIT* also increased significantly to € 816 mn (9m 2011: € 306 mn). It includes the charge booked in H1 2012 for the A350 XWB, the update of the A380 wing rib feet provision and a charge for the Hawker Beechcraft programme closure. It benefited from a positive foreign exchange effect.
Revenues at Airbus Military of € 1,194 mn decreased compared to last year (9m 2011: € 1,747 mn) mainly due to lower revenue recognition on the A400M as well as lower Tanker revenues.
EBIT* of Airbus Military improved slightly to € 8 mn (9m 2011: € 5 mn), reflecting lower R&D expenses.
During the first nine months of 2012, Airbus Commercial booked 382 net aircraft orders (9m 2011: 1,038 units). The 2011 sales tally included contracts announced at the Paris Air Show, where Airbus achieved an industry record, driven by the A320neo, still unmatched by competition.
Airbus continued to see healthy demand for both the A320 and the A320neo, with significant orders booked from Chinese lessor ICBC Financial Leasing Co. Ltd. and Philippine Airlines during the third quarter. Airbus made good progress on the A320 ‘Sharklet’ flight testing programme, with AirAsia due to take delivery of the first aircraft equipped with the fuel saving devices by year end.
Following on from the order by Cathay Pacific for the A350-1000, Singapore Airlines in October announced its intention to order 20 A350-900s and 5 A380s. Thai Airways International took delivery of its first A380 in September, becoming the ninth airline globally to operate the double-decker aircraft.
The challenging A350 XWB programme continues to make progress. Both the static test aircraft and MSN 1, the first flying aircraft, are in assembly and power-on of the front fuselage section has been successfully achieved. Wing drilling is now on track. Airbus continues to target first flight for mid-2013 and Entry-into-Service in H2 2014. The supply chain performance is still challenging.
During the first nine months of 2012, Airbus Military recorded 30 orders and delivered 11 aircraft. Airbus Military’s book-to-bill ratio was above 1 for the first nine months, driven by growth in export markets.
The A400M flight testing programme continues, having accumulated more than 3,800 flight test hours completed by the end of September. The root cause of the recent engine technical issues has been identified. A400M Initial Operating Capability is targeted in Q1 2013 on a configuration to be agreed with OCCAR, allowing the first delivery to France in Q2 2013. Three further deliveries are planned later that year.
At the end of September 2012, Airbus’ consolidated order book was valued at € 502.7 bn (year-end 2011: € 495.5 bn).
The Airbus Commercial backlog amounted to € 482.0 bn (year-end 2011: € 475.5 bn), which comprises 4,414 units (year-end 2011: 4,437 aircraft) and represents around 7 years of full production.
Airbus Military’s order book amounted to 236 aircraft, equalling € 21.8 bn (year-end 2011: € 21.3 bn).
Revenues at Eurocopter increased by 19 percent to € 4,116 mn (9m 2011: € 3,458 mn), mainly driven by more Super Puma deliveries, higher repair and overhaul support activities and the full inclusion of the Vector Aerospace business consolidation.
The first batch of 4 Tiger helicopters in the ASGARD configuration for deployment to Afghanistan was delivered to the German government on time this quarter. Deliveries reached 300 helicopters (9m 2011: 323 helicopters).
The Division’s EBIT* increased significantly by 76 percent to € 277 mn (9m 2011: € 157 mn). The 9m 2011 EBIT* included a net charge of € 120 mn. Therefore, the Eurocopter EBIT* before one-off was stable compared with the 2011 level as the favourable mix on commercial and services, including Vector, was weighed down by higher military sales and higher R&D activity.
The Division is continuing its high stake discussions with several NH90 and Tiger customers, who are seeking to reduce deliveries, the outcome of which is still open.
In close collaboration with the investigation authorities, Eurocopter is devoting all its efforts in analysing and mitigating the root causes for the incidents on Super Puma and Ecureuil B3e.
During the first nine months of 2012, Eurocopter’s net order intake rose to 286 compared to 259 net orders for the same period last year. The order value increased significantly compared to last year, mainly due to a favourable mix on EC175 and Super Puma and the consolidation of Vector Aerospace.
In the third quarter, Eurocopter secured important orders in the Emergency Medical Services segment for Med-Trans Corporation and the civil security segment for Kazakhstan.
Eurocopter’s order book decreased slightly to € 13.3 bn (year-end 2011: € 13.8 bn) comprising 1,062 helicopters (year-end 2011: 1,076 helicopters).
Astrium revenues in the first nine months of 2012 rose by 14 percent to € 3,934 mn (9m 2011: € 3,440 mn), mainly due to the inclusion of the acquired Vizada group.
EBIT* increased by 16 percent to € 191 mn (9m 2011: € 165 mn), despite higher R&D compared to last year. The EBIT* increase is due to margin improvements thanks to efficiency and productivity gains resulting from the AGILE transformation programme as well as a positive Vizada contribution.
Astrium’s order intake reached € 2.9 bn over the first nine months of 2012 (9m 2011: € 2.3 bn), representing an increase of 23 percent compared to the previous year. This performance was driven by a solid level of services activity.
Astrium demonstrated strong programme execution during the third quarter achieving three Ariane 5 launches, resulting in the 51st consecutive success. Three Astrium-built satellites were launched this quarter and the third Automated Transfer Vehicle (ATV) mission has been successfully completed.
The European Space Agency (ESA) Ministerial Council, scheduled for 20-21 November in Naples, Italy, is expected to provide clear perspectives on the future direction of European space programmes.
At the end of September 2012, the order book of Astrium amounted to € 13.8 bn (year-end 2011: € 14.7 bn).
Cassidian revenues with € 3,484 mn (9m 2011: € 3,419 mn) are in line with the previous year’s level while EBIT* decreased to € 156 mn (9m 2011: € 170 mn), as expected. The decrease in self-funded R&D was offset by continuing investments in globalisation and transformation.
The appointment of a new management team in September is designed to reduce complexity, enhance margin performance and to strengthen internationalisation.
A comprehensive review of cost structure and contract execution enhancement was launched with a view to concluding it before year-end.
Cassidian’s order intake of € 3.4 bn for the first nine months was significantly above last year’s level (9m 2011: € 2.6 bn), despite the challenging market environment, driven mainly by profitable Eurofighter and MBDA business.
Cassidian continues to explore export opportunities for Eurofighter in the Middle East and Asia.
During the third quarter, Cassidian closed the acquisition of Rheinmetall Airborne Systems. Furthermore, the Division finalised the acquisition of a 75.1% stake in the Carl Zeiss Optronics business in October 2012.
At the end of September 2012, the Cassidian order book had risen to € 15.9 bn (year-end 2011: € 15.5 bn).
Headquarters and Other Businesses (not belonging to any Division)
Revenues of Other Businesses increased 28 percent to € 1,067 mn (9m 2011: € 833 mn), mainly due to volume increase at EADS North America and ATR.
EBIT* of Other Businesses decreased to € 15 mn (9m 2011: € 20 mn). The 9m 2011 EBIT* included a € 10 mn gain from the divestiture of Defense Security and Systems Solutions – DS3 – in EADS North America.
Therefore, the EBIT* before one-off improved by € 5 mn thanks to the profitability improvements in the Cabin Interior business of Sogerma and to improvements at EADS North America.
ATR received 15 net orders over the first nine months of 2012 (9m 2011: 145, which included exceptional orders at Paris Air Show) and delivered 37 aircraft (9m 2011: 30). At the end of September, the ATR backlog stood at 202 aircraft.
At EADS North America, a flight demonstration has begun for the US Army’s Armed Aerial Scout helicopter programme.
At the end of September 2012, the order book of Other Businesses had decreased to € 2.7 bn (year-end 2011: € 3.0 bn).
India Infoline Research Team / 14:59, May 20, 2015
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