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EADS REPORTS LOSS IN FIRST QUARTER

10 May 2007. European Aeronautic Defence & Space Co. NV (EADS)said on Thursday it swung to a a first-quarter net loss of €10m ($13.54m), after a net profit of €522m a year earlier. EADS said it had been affected by the weak dollar, charges related to a new restructuring plan for Airbus and exceptional costs related to the A380 superjumbo program, all of which eroded profit margins.

The loss was smaller than the average estimate of €273m ($369.51m) of eight analysts polled by Dow Jones Newswires. Earnings before interest, tax and other expenses plunged to €89m($120m) from €791m in the first three months of 2006.
Revenue for the first quarter was roughly stable at €9bn ($12.18bn), from €9.1bn a year before.

EADS Chief Financial Officer Hans Peter Ring told shareholders last week that the Airbus unit is expected to post another hefty loss this year but could return to profitability in 2008.

In the first quarter of 2007, EADS (stock exchange symbol: EAD) produced an EBIT* (pre goodwill and exceptionals) of €89m, including an Airbus restructuring provision with regard to the Power8 transformation programme. Presented in detail at the end of February, Power8 entails tough measures to bring Airbus once again to the forefront of the industry. In the first quarter of 2007, the high level of deliveries led to revenues of € 9.0bn.
“Through the first quarter of 2007, the aerospace and defence market was supportive and fuelled our businesses. But against this backdrop, as expected, Airbus had a challenging time, which only highlights the inevitability of the Power8 restructuring, designed to address challenges that will unfold over the coming years. We are working hard to ensure its steady implementation,” said EADS CEOs Tom Enders and Louis Gallois. “Our helicopters, defence and space businesses continue to deliver solid results. Nevertheless, the progressive improvement of our competitiveness is necessarily a long-term effort. We are ensuring all EADS management stays focused on this vital task.”

Revenues remained roughly stable at € 9.0bn (Q1 2006: € 9.1bn). Airbus handed over 115 aircraft to the customers (Q1 2006: 101) and increased its revenues, as did EADS Astrium and Eurocopter. Group revenues were burdened by less A400M milestone recognition than in the first quarter of 2006 and by a negative US Dollar impact.

The Group’s EBIT* decreased to €89m in the first quarter of 2007 (Q1 2006: €791m). The EBIT* was mainly affected by Airbus through a restructuring provision of €688m for Power8 at Airbus, by costs to support the A380 programme and by fewer gains from one-timers than in the first quarter of 2006. Eurocopter increased its EBIT* contribution and EADS Astrium showed continued benefits from its successful restructuring. Additionally, EADS Sogerma, now reshaped, delivered a positive EBIT*.

The Group realised a Net Loss of € -10 million (Net Income Q1 2006: € 522m), or € -0.01 per share (Earnings per share Q1 2006: € 0.66), which is in line with the Group’s EBIT* development. In the first quarter of 2007, self-financed R&D expenses accounted for € 550m (Q1 2006: € 536m). The slight increase resulted from Airbus’ continuing aircraft development programmes and a higher Research & Technology (R&T) effort across the Group.

Free Cash Flow including customer financing dropped to € -815m (Q1 2006: € 363m) reflecting unfavourable working capital development, mainly at Airbus. Inventories increased across Divisions and higher payments for trade liabilities were made than last year. The deterioration of Free Cash Flow is further explained by lower effects from customer financing sell downs at Airbus. Free Cash Flow before customer financing amounted to € -778m (Q1 2006: € -67m). At the end of March 2007, the Net Cash Position stood at € 3.5bn (year-end 2006: € 4.2bn).

Demand remained robust, and once again, the Group’s order intake reached € 10.5bn (Q1 2006: € 10.5bn) despite the weakness of the US Dollar a

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