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14 Nov 08. EADS (stock exchange symbol: EAD) delivered encouraging results for the first nine months of 2008, but is facing challenges in critical programmes. The Group continued to show robust underlying performance and benefited from strong market demand. EADS recorded a remarkable order intake across its product portfolio, receiving 737 new aircraft orders at Airbus as well as orders for 605 new helicopters at Eurocopter. Capitalising on continued restructuring efforts in previous years, Astrium displayed both strong top and bottom line growth. The Defence & Security Division achieved an EBIT* growth of 74 percent. The Group is carefully monitoring the development in the financial markets and has started preparing itself to limit negative impact through a variety of measures.
“EADS faces the impacts of the financial crisis in a position of strength. Our large and well diversified order book covers deliveries for several years.

A strong Net Cash position ensures stability while giving us flexibility to adapt to a changing economic environment,” said EADS CEO Louis Gallois. “The pressure on the A400M programme remains and we are conducting ambitious efforts to tackle both the industrial and commercial challenges in discussion with our customers and suppliers. EADS is more determined than ever to get this complex programme under control.”

In the A400M programme, the unavailability of a committed and reliable schedule for the propulsion system, which compounds unresolved issues with certain equipment supplies as well as equipment and systems integration, will lead to further delays. Due to the unavailability of a reliable
schedule update in the A400M programme EADS must shift temporarily to the early stage contract accounting methodology and suspend the milestone accounting for this programme.** EADS has started to discuss with its main customers to define next steps. Once a schedule update is achieved, EADS will resume the milestone accounting and further update the A400M charge, for which €341m have been recorded in the third quarter of 2008 and have burdened EBIT* accordingly.

Revenues increased by 7 percent to € 29.4bn (9m 2007: € 27.6bn) reflecting growth from operations across all five Divisions. The increase includes €803M resulting from the move to the early stage accounting methodology in the A400M programme applied in Q3 2008.

EADS’ EBIT* (pre goodwill and exceptionals) for the first nine months of
2008 improved to €2,018m compared to €-353m in the same period of the previous year, when Airbus’ EBIT* in particular was burdened by higher exceptional charges (Power8, A400M, A350). The EBIT* growth resulted from improvements across all Divisions. At Airbus, strong operational performance in series programmes, achievement of Power8 cost savings and lower exceptional charges than in the previous year contributed positively to the improvement. In the first nine months of 2008 deterioration of maturing hedge rates was nearly compensated by a positive US dollar spot rate impact of around €265m resulting from the revaluation of loss making contracts at closing spot rate.
In line with the Group’s EBIT* development, EADS improved its Net Income
to €1,082m (9m 2007: €-705m), or earnings per share of € 1.34
(earnings per share 9m 2007: €-0.88). Self-financed R&D expenses decreased slightly to €1,792m (9m 2007: €1,903m), but are expected to grow more strongly in the fourth quarter mainly in the context of Airbus’ A350 programme.

Free Cash Flow before customer financing was significantly higher at
€1,959m (9m 2007: €168m) driven by an improvement in working capital caused by lower additions to inventories and higher advance payments received. Including a low customer financing contribution of €8m, Free Cash Flow improved to € 1,967m (9m 2007: €111m). Despite a cash-out for acquisitions and for option hedges, the
Net Cash position reached a record € 9.0bn (year-end

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