EADS extends Airbus restructuring, tackles dollar

FRANKFURT/PARIS - European aerospace group EADS announced an extension to its Power8 restructuring at planemaker Airbus on Wednesday and measures to tackle a weak dollar as it posted weaker than expected second quarter profit.

By (Reuters)

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Published: Wed 30 Jul 2008, 6:24 PM

Last updated: Sun 5 Apr 2015, 1:01 PM

The Airbus parent company reaffirmed operating and cash saving targets for the Power8 plan which runs from 2007 to 2010 and said a new Power8 Plus programme would deliver a further annual 1 billion euros in 2011-12 at the operating income level.

The original plan calls for recurring annual improvements of 2.1 billion euros by 2010.

Finance Director Hans Peter Ring said Airbus had made 400 million euros of savings in the first half and was targeting 600-800 million euros by the end of this year.

Second-quarter net profit rose 46 percent to 118 million euros, while earnings before interest and tax rose 44 percent to 389 million euros on revenues up 5 percent to 9.886 billion.

Analysts polled by Reuters had on average forecast net profit of 342 million euros and EBIT of 531 million euros.

Second-quarter income was hit by a higher than expected 715 million euro charge for the most recent delays to the A380 superjumbo, announced in May, dampening a robust underlying performance at Airbus and most other EADS units.

Adjusting for that charge, "Airbus results were pretty strong and clearly beating our and the market expectation," DZBank analyst Markus Turnwald said in a note.

Nonetheless, with charges weighing, EADS shares fell 2.9 percent to 12.3 euros, bucking a 1 percent rise in the market.

Currency risk

Airbus in May announced a fourth set of superjumbo delays of 3-5 months on top of two years of delivery delays as it grapples with difficulties in wiring up the world's largest jetliner.

EADS said it had also taken a separate hit of 700 million euros after revaluing contracts on all its programmes including the A380, in the light of recently falling dollar rates.

Underlying operating profit rose to 1.996 billion euros from 1.550, EADS said, but it left its target for the full year at 1.8 billion euros and said this included some "upside".

It continued to predict revenue above 40 billion euros with Airbus deliveries of around 470 aircraft.

The world's largest civil planemaker by production, and the second largest behind Boeing in terms of new orders, is overhauling itself to cope with a loss of competitiveness due to the strong euro against the backdrop of a global airline crisis.

"The next months will be decisive for the airline industry," Chief Executive Louis Gallois said in a conference call.

EADS confirmed that it had increased its target for Airbus orders in 2008 to more than 850 new planes, from 700, following a solid intake at the Farnborough air show this month.

Airbus made a quarterly operating profit of 84 million euros, down 5 percent, on sales that rose 4 percent to 6.53 billion euros.

It raised its forecast for free cash flow before customer financing to more than 1 billion euros, but said this was a volatile item that is difficult to predict.

Planemakers have reported mounting pressure from customers to help finance purchases amid a crisis over high oil prices which is forcing some airlines to cancel or defer purchases.

Under pressure from a weak dollar, EADS said it was taking "decisive actions" on currency hedging and had started to complement its hedging positions by buying $7 billion of options in the currency market.

EADS once again softened its deadline for the first flight of the A400M military plane, previously anticipated for September or October, to the "autumn".

The plane for seven European NATO nations was originally due to fly in January but the date has crept backwards due mainly to problems in developing the West's largest propeller engines.

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