Dollar worries weigh heavily on EADS 3Q2009 results, full year result still uncertain

EADS, parent of Airbus, reported a 3Q2009 net loss of EUR87 million, a reversal of more than EUR750 million from the same period in 2008, as the strength of the Euro eroded cost competitiveness and airlines slowed orders in response to the tough conditions. The company has also seen price deterioration on aircraft deliveries, which have matched 2008 levels.

Revenue declined 2% year-on-year to EUR9.5 billion. Revenue at Airbus declined 3%, to EUR6.2 billion, although revenue in its military segment dropped 26. The only segment to show revenue growth was the Eurocopter business, which grew 15% year-on-year to EUR1.1 billion.

EADS’ EBIT in 3Q2009 was EUR201 million, a 77% decline compared to 3Q2008 and well below the forecasts of most analysts. Over the first nine months of the year, EADS has booked “exceptional negative foreign exchange impacts” of approximately EUR700 million. 3Q2008 EBIT was also supported by an EUR965 million effect resulting from the revaluation of loss-making oil hedging contract provisions.

EBIT at Airbus dropped 99% year-on-year, to just EUR4 million. Eurocopter and the Astrium satellite business reported EBIT of EUR66 million and EUR56 million respectively, while Defence and Security EBIT was down 9%, to EUR77 million.

EADS’ order intake declined 72% year-on-year to EUR24.6 billion in 32Q009, a drop of more than EUR60 billion, mostly due to declines in commercial airline ordering and military spending. Airbus’ order intake fell from EUR79 billion in 3Q2008 to EUR11.3 billion in 3Q2009, with military sales falling from EUR5.1 billion to EUR1 billion.

Airbus is maintaining its estimate for new gross orders of 300 aircraft in the year. After booking just 59 new orders in 3Q2009 (and just two Oct-2009), the full year outlook has been buoyed somewhat by several new orders and agreements at the Dubai Air Show this week, including 12 A350s by Ethiopian Airlines, 10 A320s by Yemenia, four A380s and two A350s for Vietnam Airlines and reports of Air Austral firming up its order for two A380s. These come on top of Air New Zealand’s order for 14 A320s and Turkish Airlines’ order for three A330s (and an MoU for two A330 freighters) in early Nov-2009.

Including the Dubai Air Show, Airbus has booked approximately 200 gross orders this year. Negotiations with several other carriers could be concluded before the end of 2009.

Production this year is expected to approach 490 aircraft. However, Airbus has not yet ruled out cutting production rates in 2H2010, although a decision would be several months off yet. The company is “cautiously envisaging an improvement of the economic and market conditions in the next months”, after noting that worldwide passenger traffic is now increasing for the first time since Nov-2009.

No full-year earnings guidance

EADS has not announced a full-year earnings guidance, as a result of “ongoing uncertainties on the magnitude of the potential A400M and A380 charges” in 4Q2009, posing a “substantial risk that a further financial burden” may appear. The South African Government recently withdrew from an agreement to purchase the A400M, while Airbus has faced continued “production instability and customer requests for delivery postponements” for the A380, and will likely shift some deliveries for 2009 to 2010.

2009 revenues are expected to be roughly in line with the previous full year. However, further deterioration of exchange rates in 4Q2009 could lead to slightly lower revenues. EBIT before one-off items for the full-year 2009 is expected to be approximately EUR2 billion.

EADS shares were up 4.5% in trading on Monday.

Aerocentury hurt by higher costs

Aerocentury shares lost 15.2% on Monday, after the company reported a 27% drop in net profit for 3Q2009 on Friday. Revenue was up +6% year-on-year, to USD8.7 million, but the regional aircraft lessor was hit by higher maintenance and depreciation costs in the quarter.

Selected Aviation suppliers’ daily share price movements (% change): 16-Nov-09