By Tom Pfeiffer and Noah Barkin
UPDATE 3
AMSTERDAM/PARIS, May 17 (Reuters) – European aerospace group EADS said on Friday it expected to achieve its profit and sales targets for 2002, despite an airline industry slump which pushed orders for its Airbus jets down 93 percent in the first quarter.
EADS said it was sticking with a goal for earnings before interest and tax (EBIT) of 1.2 billion euros and flat year-on-year revenues in 2002. The company confirmed the forecasts as it reported that first-quarter EBIT edged up two percent to 315 million euros ($287 million) and the bottom-line slumped to a loss of 25 million euros, weighed down by goodwill.
The EBIT figure was above market expectations, but the increase was flattered by a 63-million-euro gain booked on the sale of Airbus engine pod-making venture Aircelle and a 59-million-euro positive swing in “headquarters and eliminations”.
“The underlying EBIT was down and there is a conspicuous lack of guidance for 2003,” said Nick Cunningham of Schroder Salomon Smith Barney. “We still believe that the dismal state of the airline industry and a huge surplus of aircraft will lead to lower sales than Airbus expects next year and the year after.” Shares in EADS were down 0.17 percent at 17.95 euros at 1415 GMT after pushing earlier in the session to an eight-month high of 18.32 euros. The stock fell as low as 9.14 euros in the weeks following the September 11 hijacked plane attacks in the United States.
SIGNS OF RECOVERY EADS, which has dual headquarters in Paris and Munich but is registered in the Netherlands, gets nearly all its profits from 80-percent owned jetmaker Airbus SAS, which slashed its forecast for sales this year by a quarter after the U.S. attacks exacerbated an industry slump and forced airlines to scrap plans to buy new aircraft. But while the industry is still struggling with losses, recent figures suggest Europe’s airlines are starting to see some recovery in demand.
Some brokerages have raised their recommendations on EADS since Airbus Chief Executive Noel Forgeard said last week that he was more optimistic about the strength of 2003 aircraft deliveries and confirmed estimates for 300 deliveries this year.
But many analysts are still sceptical about whether Airbus can keep deliveries at the same level next year and worries are growing that a weakening dollar could eat into EADS profits in the years ahead.
EADS Chief Financial Officer Axel Arendt, speaking to analysts on a conference call following the results, declined to offer a 2003 forecast for deliveries, saying the company hoped to provide a clearer picture next month.
The crisis in the worldwide air transport industry was evident in the first-quarter figures, which showed an 80 percent plunge in new orders to 3.8 billion euros and a 93 percent drop in orders at Airbus to 1.26 billion euros.
Nevertheless, EADS said it remained confident it could meet its targets and forecast its order backlog would rise above 190 billion euros this year, helped by a doubling of defence orders.
“We expect our book-to-bill ratio to remain above one thanks partly to the A400M (military transport plane),” co-CEO Rainer Hertrich told the company’s annual shareholder meeting in Amsterdam.
“Our backlog is showing no weakening even with the decline in air traffic. It will continue to grow despite the downturn.” Protestors disrupted the question and answer session at the meeting, pressing the company to reveal whether it was selling military equipment to “undemocratic or oppressive regimes”.
A small group, calling themselves “ethical shareholders”, later issued a statement saying they planned to sue the company for cutting short the session and refusing to answer some of their questions.
