Calm amid the stormEADS shows solid 2008 results

Published 12 March 2009

EDAS reports 11 percent increase in revenues to €43.3 billion and a record order book for the group that stands at €400 billion; A400M program problems loom

EADS has delivered its final results for 2008, reporting an 11 percent increase in revenues to €43.3 billion (£40 billion) and a record order book for the group that stands at €400 billion. Group EBIT stands at €2.8 billion, supported in part by the effects of foreign currency fluctuations, while research and development spending has increased 2 percent to €2,669 million. Employee numbers have also risen 2 percent to 118,349 compared with the same period in 2007.

Highlights

  • Group EBIT*of €2.8 billion -– supported by excellent underlying performance, significant positive foreign currency effects but burdened by program charges
  • Net Income of €1,572 million (FY 2007: €-446 million)
  • Free Cash Flow exceeded expectations with €2.6 billion
  • Robust balance sheet with Net Cash at a record level of €9.2 billion
  • Revenues increased by 11 percent to €43.3 billion
  • Order book grew 18 percent to a record of €400 billion
  • Dividend proposal of €0.20 per share
  • A400M issues with customers and suppliers pending (see below)

* For our readers with accounting training: 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.

A400M program woes
Despite a set of results that includes a net income of €1,572 million and net cash at a record level of €9.2 billion, doubts persist about the A400M program, which, if canceled, could result in €5.7 billion of lost business.

In May 2003 Airbus Military and OCCAR, the procurement organization representing seven NATO launch customers including Britain, signed a contract for the delivery of 180 A400M military airlift aircraft. The 77-month, single-phase development and production program was expected to see first deliveries in 2009. EADS has stated that the A400M will not perform its first flight before the end of the month. As such, OCCAR has the contractual right to terminate the entire A400M launch contract as of 1 April 2009 and receive reimbursement for payments already made, which EADS estimated at approximately €5.7 billion.

Despite being hailed at the time as most ambitious European military procurement program ever undertaken, Louis Gallois, chief executive officer at EADS, told delegates at the 2008 annual results conference in Munich that the original launch schedules were unrealistic. Gallois said that a more realistic target would see deliveries three years after the A400M’s first flight and that a bridging solution could be offered to OCCAR to fulfill any operational requirements.