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09 Mar 05. AGENCE FRANCE-PRESSE, MUNICH, Germany, reported that EADS reported on March 9 a 60-percent surge in net profit for 2004 and raised its target for this year. But it said that the break-even point for its superjumbo airliner, the A380, would be higher than expected, meaning that it would have to sell more aircraft to recover start-up costs because the dollar was weak. The European conglomerate, which controls the Airbus aircraft manufacturer and has wide-ranging defense aeronautics interests, produces in euros but sells in dollars.

EADS joint chairman Philippe Camus said the A380 project would reach a break-even point when more than 300 planes were sold, if the dollar remained weak against the euro and other currencies.

“If we fix the euro/dollar rate at 1.30 euros, and based on what we have already done for the program (in terms of currency hedging), and also taking into account the higher development costs, we get a break-even point that is well above 300 planes,” Camus said. Last week, Airbus chief executive Noel Forgeard, set to replace Camus later this year, told Aviation Week magazine that the A380 breakeven point was 270 planes, instead of the 250 planes originally forecast, but he said this was due exclusively to cost overruns.

Shares in EADS dropped 1.51 percent to 23.54 euros in midday Paris trading, in a market 0.38 percent higher, amid investor disappointment with the higher A380 break-even point and profit taking, dealers said.

“The hike above 300 aircraft isn’t good news,” said Harald Liberge-Dondous of brokerage Aurel Leven. “It’s an unpopular announcement, even if it isn’t a catastrophe,” he added.

Net profit surged by 60 percent to €1.03bn ($1.36bn) from the 2003 figure, fuelled mainly by the Airbus aircraft manufacturing subsidiary, and a switch into profit by space activities. The result was higher than the company had expected and the group, which owns 80 percent of Airbus, said it was raising its target for operating profit this year.

Total group sales were in line with forecasts at €31.76bn. EADS raised its 2005 target for earnings before interest and tax (EBIT) to €2.6bn from a previous €2.4bn, saying that the growth it was achieving reflected improved performance by all divisions, partly offset by less favorable foreign exchange coverage and the weakness of the dollar. The group expected sales this year to rise by 3.9 percent to €33bn driven by an increase of 10.0 percent in defense activity sales.

EADS said full-year EBIT, before the writing down of acquired assets and before exceptional items, rose by 58.0 percent to €2.444bn compared with a target set by the company of more than €2.3bn. The operating margin was 7.7 percent, in line with a forecast that it would exceed 7 percent, from 5.1 percent in 2003. The group said that the strong rise of EBIT earnings reflected a sharp increase in profitability by Airbus and the space division. The Airbus EBIT figure rose to €1.922bn equivalent to 5.9 percent of sales, owing mainly to an increase in the number of aircraft delivered to 320 from 305 in 2003, an increase in the proportion of big aircraft supplied and to efforts to hold down costs.

The space division switched into profit with an EBIT of €10m from a loss of €400m in 2003, enabling the business to look forward to solid growth, EADS said. The board recommended a 25 percent increase in the dividend for 2004 to 0.50 euros per share.

Earlier, Camus had told AFP that a tightening of links between EADS and the French defense electronics group Thales was no longer on the cards because the German group DaimlerChrysler, the biggest shareholder in EADS with 30 percent, had said it objected. Camus said: “For the moment, the matter is closed.” This was because the head of DaimlerChrysler Juergen Schrempp was not convinced that the p

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