|Revenues||will experience a single-digit decrease|
|Airbus||deliveries 440 to 450 aircraft|
|EBIT*||will remain roughly stable|
|Free Cash Flow||negative ( € -1 billion)|
Under its 2007 internal budget, EADS plans its revenues will experience a single-digit decrease (mainly due to the assumed €/US$ rate of 1.30), and its EBIT* will remain roughly stable in 2007.
Adjusted for a stable US Dollar, Airbus revenues would remain level, based on 440 to 450 deliveries through the year, and despite lower contributions from the A400M. Airbus will display another substantial loss in 2007, attributable to charges for the Power8 restructuring, further costs to support the A380 programme, potential A350XWB launch charges, higher R&D expenses, as well as the impact of the worsening US Dollar parity to the Euro.
Meanwhile, helicopters, defence and space businesses should display stable revenues, and should collectively increase their contribution to a combined EBIT* expected to be close to € 1 billion as soon as 2007.
The Free Cash Flow contribution from Airbus in 2007 will lead to a negative Group-wide Free Cash Flow as low as € -1 billion. However, volatility of working capital components can provoke substantial swings in this figure.
Over the medium term, the following factors will drive EADS' outlook:
Deliveries of aircraft are currently expected to continue to grow, albeit at a much reduced rate. Airbus revenues will most likely be affected by a deterioration of mix and of pricing for recent orders, partly due to competitive pressure.
Research and Development expenses are planned to grow gradually, driven by the A350XWB development and increased R&T spending.
In the context of management change at Airbus, and the cost volatility resulting from the recent industrial problems on programmes, the management is working to establish a satisfactory long-term Airbus plan, and it is currently concentrating on the rebaselining of its cost base, to target mid-single-digit EBIT* margins.
All other businesses are expected to collectively grow their revenues and EBIT* contribution over the coming years.
EADS management is committed to restoring Group wide EBIT* margins, although at levels lower than the margin achieved in 2005.
* EADS uses EBIT pre-goodwill impairment and exceptionals as a key indicator of its economic performance. The term “exceptionals” refers to income or expenses of a non-recurring nature, such as amortization expenses of fair value adjustments relating to the EADS merger, the formation of Airbus S.A.S. and the formation of MBDA, and impairment charges.