|
EADS says profit 'on track'
|
 |
October 25, 2000: 11:15 a.m. ET
Aerospace multinational upbeat, but currency hit mars first-time report
|
LONDON (CNNfn) - The European Aeronautic Defence and Space Co. said Wednesday that healthy demand for Airbus jets put operating profit in the first half of 2000 on track to meet its full-year target, although a huge deficit on a misjudged currency hedging deal dragged the bottom line far into the red.
Europe's rival to Boeing Co. (BA: Research, Estimates), the world's leading maker of airliners, said half-year profit before interest, tax, goodwill and exceptional items was  553 million ($459 million) - a notional figure,  because the three-way merger of France's Aérospatiale Matra, Germany's DaimlerChrysler Aerospace and Spain's CASA didn't take effect until July 2000. The company didn't give a comparable figure for a year earlier.
Some 440 million of that profit was the result of gains from fluctuations in currency rates, as the weakening European currency meant that payments received from customers using other currencies translated into more euros.
However, a net loss of 359 million marred the company's first earnings report since the merger. EADS, the world's third-largest aerospace company put the blame on a 643 million charge linked to a currency hedging position that generated losses as the euro sank in value. The European currency has lost more than a quarter of its worth against the dollar since it came into existence in January 1999.
Toulouse-based Airbus Industrie, 80 percent owned by EADS, has been giving Boeing Co. (BA: Research, Estimates) a run for its money, taking an increasing share of new-plane orders placed by airlines round the world. One of its most important weapons designed to wrest yet more of the  market away from Boeing is the A3XX, a so-called super-jumbo that has gone into development in recent months, and is designed to carry up to 555 passengers.
"We are enjoying strong activity in the commercial aircraft market that far exceeds our expectations from as recently as four months ago," Philippe Camus, co-chief executive officer, told a news conference.
Airbus generated profit of 516 million before interest, tax, goodwill and exceptional items million, contributing 93 percent of the group's operating profit. BAE Systems PLC owns a minority 20 percent share of Airbus.
"It's a solid set of results," said Harald Hendrikse, an aerospace analyst at Credit Suisse First Boston. "It accentuates how extremely sensitive EADS is to dollar movements."
The charge for the currency loss "neither has an effect on the cash position of the company, nor does it reflect any change in its economic performance," EADS said. The firm is phasing out this type of currency policy from Aerospatiale Matra.
Hendrikse said a weak euro is good for Airbus, the commercial airplaine builder, and that EADS is likely report an even higher operating profit in the second half, after the euro slipped to new lows against the dollar.
Order for A3XXs
EADS reported first-half revenue of 10.6 billion.
Shares of Amsterdam-registered EADS (PEAD) rose 3.1 percent to 21.75 in Paris.
Airbus last month won orders for 10 A3XX's as part of an $8.6 billion, 25-jet order from Singapore Airlines Ltd., dealing a blow to Boeing's 30-year dominance in the market for planes with more than 300 seats, a segment where the U.S. company's 747 model has long reigned.
"We do not see any sign of a slowdown in this market, and Airbus is increasing production capacity of both short and long-range aircraft," he said.
Camus said deliveries of long-range A330/A340s would rise to eight per month by 2003 from around five per month now.
Chief Financial Officer Axel Arendt told reporters the company expected earnings before interest and taxes to exceed 1.25 billion in 2000, while revenue would increase 7 percent from last year's pro forma sales figure of 22.6 billion.
Many analysts hadn't published estimates of the aerospace company's earnings, citing uncertainties about EADS' accounting. Among those who had prepared profit forecasts, expectations were for profit of between 330 million and 434 million before interest, tax, goodwill and exceptional items, and a net loss of between 280 and 350 million. 
--from staff and wire reports
|
|
|
|
|
|
EADS
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
