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EADS SWINGS INTO PROFIT

08 Mar 04. EADS swung to a net profit in 2003 amid an improved performance by its military operations, and raised its earnings forecast for this year following an accounting policy change.

Europe’s largest aerospace company and Airbus parent posted a net profit of EUR152m, (2002: loss of EUR299m). The year-earlier figure was hit by a EUR350m impairment charge to reflect a deterioration in the space satellite markets. In the fourth quarter alone, EADS made a net profit of EUR276m from a loss of EUR322m a year earlier.

EADS said it could acquire small and medium-sized businesses in the United States to boost its access to that market, but that it was not targeting large companies there.

“If there is an opportunity to buy a small or medium sized business in the U.S. that would give us better access to the market, why not?” said EADS co-Chief Executive Philippe Camus at the company’s annual results news conference.
Full year sales rose 1% to EUR30.13bn with order intake rising 97% to EUR61.15bn. Key unit Airbus saw its sales decline 2% to EUR19.05bn largely as a result of the weak dollar while the military operations saw an 18% rise in sales to EUR7.1bn. For 2004, EADS raised its forecast for earnings before interest, taxes, goodwill amortization and exceptional items to EUR1.8bn from the previous guidance of EUR1.7bn. This increase is due to the application of International Financial Reporting Standards rules on the capitalization of development costs.

EADS reiterated that Airbus expects “close to” 300 plane deliveries in 2004 compared to 305 last year. Last year, Airbus overtook Boeing Co. (NYSE:BA – News) to become the world’s largest supplier of commercial aircraft. Airbus is owned 80% by EADS and 20% by BAE Systems PLC .EADS also repeated that it expects stable revenues in 2004 assuming an exchange rate of EUR1=$1.20.

In a statement, EADS’ joint Chief Executive Officers Rainer Hertrich and Philippe Camus said the company expects to see stronger growth over the medium term. “The expected 2005 commercial aviation market upswing is within reach. Space will reap the benefits from restructuring and the defense contribution will continue to increase,” the CEOs said.

The Space Division made an EBITA before exceptional items loss of EUR400m (2002: loss of EUR269m). The 2003 figure was hit by charges of EUR288m related to a restructuring program that included job cuts.

EADS is aiming to increase the amount of revenues it sources from the military side to about 30% by 2005, from 24% last year. During 2003, EADS received significant defense orders, such as the £2.5bn Skynet 5 military satellite contract in the U.K. and a EUR19.7bn order for Airbus A400M transport planes from several European nations.

EADS is also leading a consortium that is in final negotiations with the U.K. Ministry of Defence over a possible £13bn midair refueling tanker contract.

A Paris-based analyst said the 2003 earnings were a touch better than he expected while the outlook won’t prompt any major changes to his forecasts. At 0820 GMT, EADS shares were up 0.7% at EUR19.07 in Paris.

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