Ad-hoc release - Improving Performance: EADS Reports Nine-Month Results 2011
Leiden, 10 November 2011
• Increase of full-year guidance for orders, revenues, EBIT* before one-off and Free Cash Flow
• Order intake up 63 percent to € 93.9 billion in nine-month 2011; order book reaches record level of € 503 billion
• Revenues up 4 percent: € 32.7 billion
• EBIT* before one-off up 29 percent: € 1.1 billion
• Strong Free Cash Flow before acquisition of Vector Aerospace of around € 600 million, slightly lower than last year
• Net Income before one-off up 86 percent: € 565 million
• Charge of € 200 million linked to A350 XWB Entry-into-Service now in H1 2014
EADS (stock exchange symbol: EAD) announces better than expected nine-month results. The commercial aircraft momentum remains robust despite recent turbulence in the macro environment, but the defence markets in the Western world are under pressure as anticipated. In the first nine months of 2011, the order intake(5) reached € 93.9 billion. EADS’ order book stood at a record level of € 503 billion. Revenues amounted to € 32.7 billion. The EBIT* before one-off of around € 1.1 billion was mainly driven by operational improvement from Eurocopter and Airbus commercial activities as well as some favourable phasing in Airbus and in Headquarters. The reported EBIT* amounted to € 885 million. Cash-flow generation remained strong and led to a Net Cash position of
€ 11.4 billion after acquisitions.
”Our nine-month results are better than expected thanks to the Group’s efforts to improve performance. I am confident the commercial aircraft market combined with our strong backlog will sustain our growth in the years to come. On the basis of existing contracts, EADS is ready to enter into discussions with the governments on the future of defence procurement programmes. The company’s services offering was further extended through new acquisitions”, said
Louis Gallois, CEO of EADS. “Our large programme developments, especially the A350, continue to have our highest management attention.”
Maturity of the A350 XWB main components at Final Assembly start remains one of the Group’s top priorities. Start of Final Assembly is now scheduled for Q1 2012 and Entry-into-Service is now scheduled for H1 2014.
In the first nine months, EADS’ revenues increased 4 percent to € 32.7 billion (9m 2010: € 31.6 billion). This growth is driven by Airbus Commercial, Eurocopter and Astrium. Physical deliveries remained at a high level with 374 aircraft at Airbus Commercial, 323 helicopters at Eurocopter and the 46th consecutive successful Ariane 5 launch.
EBIT* before one-off (adjusted EBIT*) – 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 € 1.1 billion (9m 2010: € 0.8 billion) for EADS and at around € 0.4 billion for Airbus (9m 2010: around € 0.3 billion). The increase compared to last year is mainly driven by operational improvement at Airbus and Eurocopter and some favourable phasing at Airbus and in Headquarters. EADS’ reported EBIT* stood at € 885 million (9m 2010: € 784 million).
With the A350 XWB Entry-into-Service now in H1 2014, Airbus Commercial booked a charge of € 200 million for this programme in the third quarter. Reported EBIT* includes a positive one-off due to the termination of the A340 programme of € 192 million. The US dollar mismatch and balance sheet revaluation had a negative impact on EADS’ EBIT* result of around € 50 million at the end of September. In the first nine months, Eurocopter booked a net charge of around € 120 million, thereof € 60 million in the third quarter. These net charges mainly relate to governmental programmes and SHAPE.
Net Income more than doubled to € 421 million (9m 2010: € 198 million), or earnings per share of € 0.52 (earnings per share 9m 2010: € 0.24). The improvement is driven by the Net Income before one-off(4), which increased to € 565 million (9m 2010: € 304 million) thanks to better operational earnings.
The finance result amounts to € -212 million (9m 2010: € -452 million). The interest result of € -9 million (9m 2010: € -176 million) improved thanks to a positive one-off of € 120 million due to the termination of the A340 programme. Furthermore, the 2011 average net cash position is higher than the 2010 level. Meanwhile, the other financial result amounts to € -203 million (9m 2010:
€ -276 million). This line includes, among others, a negative revaluation of EADS’ options for around € 60 million and the unwinding of discounted provisions for a negative amount of around € 110 million.
Self-financed Research & Development (R&D) expenses increased to € 2,151 million (9m 2010: € 2,038 million), driven mainly by development on the A350 XWB programme at Airbus.
Free Cash Flow for the nine months benefited from good operational performance and commercial order intake. Gross cash flow from operations reflects the improvement of the underlying profitability. Free Cash Flow before customer financing amounted to € -27 million (9m 2010: € 882 million). Free Cash Flow after customer financing stood at € 155 million (9m 2010: € 791 million). Before the acquisition of Vector Aerospace, Free Cash Flow is at € 587 million, slightly lower than last year due to the working capital deterioration. The working capital reflects an inventory ramp-up at Airbus due to the re-phasing of some deliveries in the third quarter and the progressive ramp-up to rate 38 per month on the Single Aisle production, which has now been achieved. This negative inventory effect on the cash flow should decrease in the fourth quarter. Meanwhile, the ramp-up in inventories was partially mitigated by higher advance payments at Airbus and Astrium. Customer financing generated cash of around € 180 million in the first nine months as the lessor and banking market appetite continues to be active despite recent concerns. The level of capital expenditure is in line with the 2010 level; however, EADS expects it to increase by year-end.
EADS’ Net Cash position amounted to a robust € 11.4 billion (year-end 2010: € 11.9 billion). It also reflects a cash contribution to pension assets of € 300 million and a cash purchase of minority shares for Dornier/DADC from Daimler AG.
EADS’ order intake(5) increased by 63 percent to € 93.9 billion (9m 2010: € 57.7 billion), it benefited from strong ongoing commercial momentum. At the end of September 2011, the Group’s order book(5) stood at a record level of € 503.0 billion (year-end 2010: € 448.5 billion), underpinning EADS’ top line growth into the future. The Airbus Commercial backlog has been reduced by a negative revaluation impact of around € 2.7 billion due to the slight deterioration of the
US dollar closing spot rate since year-end 2010. The defence order book decreased to € 54.5 billion (year-end 2010: € 58.3 billion).
At the end of September 2011, EADS’ workforce consisted of 128,038 employees, including 2,426 employees from the Vector Aerospace acquisition (year-end 2010: 121,691).
EADS increases its latest orders, revenues, EBIT* before one-off and Free Cash Flow guidance given in July. In 2011, Airbus should deliver 520 to 530 commercial aircraft and its gross orders should be around 1,500. EADS 2011 revenues should increase by more than 4 percent compared to € 45.8 billion in 2010.
EADS now expects 2011 EADS EBIT* before one-off to increase compared to the 2010 level, at around € 1.45 billion thanks to better than expected underlying commercial performance.
EADS expects 2011 Earnings per Share (EPS) before one-off to be around € 0.9, above the 2010 level (€ 0.86). Going forward, reported EBIT* and EPS performance of EADS will be dependent on the Group’s ability to execute on the A400M, A380 and A350 XWB programmes, in line with the commitments made to its customers. Reported EBIT* and EPS also depend on exchange rate fluctuations. As previously communicated, at € 1 = $ 1.35, the 2011 EPS should be above the 2010 level of € 0.68 and at € 1 = $ 1.45, it may be below.
Free Cash Flow before investment for acquisitions is now expected to be significantly above € 1 billion.
Latest reviews confirm that in 2012, the Group expects a significant improvement in its EBIT* before one-off thanks to higher volume, better pricing and improvement of A380 performance at Airbus.
* EADS uses EBIT pre goodwill impairment and exceptionals as a key indicator of its economic performance. The term “exceptionals” refers to such items as depreciation expenses of fair value adjustments relating to the EADS merger, the Airbus Combination and the formation of MBDA, as well as impairment charges thereon.
EADS is a global leader in aerospace, defence and related services. In 2010, the Group – comprising Airbus, Astrium, Cassidian and Eurocopter – generated revenues of € 45.8 billion and employed a workforce of nearly 122,000.