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EADS Profit Soars 19 Percent

February 27, 2013 by Leave a Comment

PARIS — European Aeronautic Defense and Space, the parent company of Airbus, reported a 19 percent rise in 2012 net profit on Wednesday, propelled by sales of commercial jets and helicopters, while its military business continued to struggle as budget pressures squeeze defense spending in Europe and the United States.

The Toulouse-based company said earnings for the full year climbed to €1.2 billion, or $1.56 billion, from just over €1 billion in 2011, on a 15 percent rise in revenue, to €56.5 billion euros. The company proposed an increase to its 2012 dividend to 60 euro cents per share from 45 cents in 2011.

Almost all of the group’s revenue gains came from double-digit growth in sales of civil aircraft, while military orders stalled. Airbus, which saw a 19 percent rise in commercial jet sales, represented 68 percent of group revenues, little changed from a year earlier.

The persistent weakness of the group’s military business comes as EADS is steeped in a fundamental review of its business strategy. A proposed merger with BAE Systems of Britain failed amid political divisions among Germany, France and Britain.

Much of the logic behind the merger project was based on the expectation that a combination with BAE Systems, a major contractor to the U.S. military, the world’s biggest spender on defense, would help to bring greater balance between commercial and military activities.

At a briefing in Berlin, Thomas Enders, the chief executive, said EADS expected to unveil the outlines of its new strategy around the middle of the year. But he hinted strongly that the group was no longer fixated on its previous target of at 40 percent of defense revenues by 2020.

Given the current budget constraints facing Western governments, Mr. Enders said, “it’s probably not such a bad thing to have rather less exposure to the defense market.” He said that EADS’s main American rival, Boeing, which derives between 40 percent and 50 percent of its revenue from military activity, was growing increasingly reliant on its civil aircraft business as well.

“Right now, I am quite happy with the imbalance we have,” Mr. Enders said. “We are under less pressure than other, pure defense companies.”

EADS began a restructuring last year of its Cassidian unit, which groups most of its defense activities, including Eurofighter, the EADS-led consortium that builds the Typhoon fighter jet. Operating profit at the unit, which announced 850 job cuts last year, plunged by 57 percent to €142 million, in large part due to nearly €200 million in charges linked to the restructuring.

Analysts warned that the outlook for EADS’s defense business was likely to get worse before it got better. “There is clearly the risk of more of this to come as France and Germany have only just begun the process of addressing their defense budgets,” Nick Cunningham, an aerospace analyst with Agency Partners in London, wrote in a note to clients.

Mr. Enders stressed that EADS would remain a “major player” in defense, but said the group was taking a close look at which aspects of its activities — besides fighter aircraft includes missiles, surveillance and cyber-security systems — were likely to be most profitable in future years.

“Our defense business is not negligible,” Mr. Enders said. “We will focus on those areas where we have a comparative advantage and where we know we can make money.””

EADS predicted that its commercial aircraft business would continue to see steady growth in 2013 and said it did not expect to see any major disruption to global air traffic as a result of the economic slowdown and lingering sovereign debt crisis in Europe. The company said it expected Airbus to sell around 700 new jets this year, down from 914 planes in 2012. Aircraft deliveries should increase slightly to between 600-610 jets, from 588 last year, after the company stepped up production of its popular single-aisle A320 planes last October to 42 planes per month from 38 planes previously.

While the group’s net cash position increased slightly last year to 12.3 billion euros from 11.7 billion euros at the end of 2011, analysts warned that the ramp up of the development of Airbus’s forthcoming widebody jet, the A350-XWB, was likely to draw down those cash reserves over the next year. EADS said the production schedule for the A350, which has a late-2014 target for entry into service, remained ”challenging” and cautioned that any unforeseen delays could lead to fresh provisions to compensate airline customers.

Airbus this month abandoned a plan to use a lightweight, high-power lithium-ion battery on board the A350 amid continued uncertainty over an ongoing investigation into what caused similar batteries installed on Boeing’s rival 787 Dreamliner to ignite or emit smoke. Airbus said it would adapt its design to use a conventional nickel-cadmium battery instead in order to avoid any possible delays linked to the safety certification of the technology by aviation regulators.

Article source: http://www.nytimes.com/2013/02/28/business/global/eads-profit-soars-19-percent.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Airbus Parent Expected to Alter Base of Its Investors

December 2, 2012 by Leave a Comment

The restructuring, which was the subject of a board meeting late Sunday, would dissolve a decade-old agreement that gave the two countries an effective veto over company strategy, a factor that contributed to the failure of a proposed merger between EADS and BAE Systems of Britain in October.

One person familiar with the details of the plans said the state-owned German bank KfW was expected to acquire a 7.5 percent stake currently held by a consortium of public- and private-sector German banks, as well as another 4.5 percent from the German automaker Daimler, which owns 15 percent of the company.

The French government, which already owns 15 percent of EADS directly, has agreed to relinquish 3 percent of its voting rights in the company, said the person, who spoke on condition of anonymity because the board had not yet voted on the change. The French would continue to hold the full dividend rights of its 15 percent stake, but ownership of the other 3 percent would be transferred to a foundation, registered in the Netherlands, that would have no voting rights.

Details of the accord were expected to be announced Monday, the person said.

The new arrangement would end a shareholder pact that dates to the creation of EADS in 2000, which was designed to balance the national interests of France and Germany by giving a core group of shareholders special veto rights and the right to appoint the members of the company’s 11-seat board.

The core shareholder group has until now included Daimler, as well as Lagardère the French magazines and missiles conglomerate, which owns a 7.5 percent stake in EADS and whose chairman, Arnaud Lagardère, is currently chairman of the EADS board.

Both Daimler and Lagardère have long made clear their desire to sell their stakes, which neither considers core to its operations. The dissolution of the shareholder agreement now frees the two companies to dispose of their holdings. Some of the shares could be sold on the open market, but European news media reports last week suggested that EADS was also considering a share buyback that could absorb a significant portion of the outstanding shares.

EADS was expected to call for an extraordinary shareholders’ meeting in the first quarter of next year to approve changes to the ownership structure as well as a new slate of board directors.

Mr. Lagardère was not expected to be renominated as chairman, although he was likely to be replaced by another Frenchman. According to EADS’s bylaws, the chairman and chief executive must be split between a French and a German. Thomas Enders, who took over as chief executive in June, is a German.

EADS has long sought a new shareholder arrangement that would preserve the politically sensitive balance of influence between France and Germany without subjecting key management decisions to the approval of politicians in Paris and Berlin.

The impact of such political interference was on prominent display in October, when the German government led by Chancellor Angela Merkel failed to approve the EADS-BAE combination, sinking a deal that would have created the world’s largest aerospace group.

Article source: http://www.nytimes.com/2012/12/03/business/global/eads-restructuring-expected-to-enhance-germanys-holding.html?partner=rss&emc=rss

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Japan Picks Lockheed Fighter

December 20, 2011 by Leave a Comment

TOKYO — Japan picked Lockheed Martin’s F-35 jet as its next mainstay fighter on Tuesday, choosing the aircraft over combat-proven but less stealthy rivals, as concern simmers over North Korea and as China introduces its own stealth fighters.

The decision came as Japan and the United States stressed that their security alliance was tight in the face of worry about an unstable North Korea after the death of its leader, Kim Jong-il.

The Japanese defense minister, Yasuo Ichikawa, said the decision to buy 42 of the stealth aircraft, valued by analysts at more than $7 billion, would help Japan adjust to a changing security environment after the announcement of the death of Mr. Kim, the 69-year-old North Korean leader.

“The security environment surrounding future fighter jets is transforming. The F-35 has capabilities that can firmly respond to the changes,” Mr. Ichikawa told reporters.

Lockheed Martin and the Pentagon hailed Japan’s selection of the F-35, saying it would help establish a strategic, conventional deterrent in the Asia-Pacific region, where officials are worried about about instability under Mr. Kim’s successor, his son Kim Jong-un.

“The F-35 Program Office looks forward to strengthening partnerships with Japan, and contributing to enhanced security throughout the Asia Pacific region,” the Pentagon said in a statement after Japan announced its decision.

The F-35, which is in an early production stage, competed against Boeing’s F/A-18 and the Eurofighter Typhoon, made by a consortium of companies including BAE Systems.

Experts said the decision to choose the Lockheed plane, made informally well before news of Mr. Kim’s death, reflected Japan’s desire to tighten its ties with the United States in the face of concern over China’s rising military might and other regional uncertainties.

“It reflects Japan’s recognition on a variety of levels that at a time of greater insecurity, it needs to be more deeply engaged with the United States on security issues,” said Brad Glosserman, executive director at Honolulu’s Pacific Forum Center for Strategic and International Studies. “Once again, Japan’s security policy is right back to the post-war Japanese mainstream — the decision that the U.S. is Japan’s best security partner.” 

Japan had been widely expected to choose the F-35 because of its advanced stealth capability and its United States origin. Stealth technology has drawn much attention in Japan since China, confirmed in January that it had held its first test flight of the J-20 stealth fighter jet.

Japan’s choice helps Lockheed Martin’s F-35 program, which has been restructured twice in the past two years, and is expected to increase the odds that South Korea will follow suit with its own order for 60 fighters. 

“This program badly needed an endorsement like this, particularly one from a technically respected customer. But there are still many complications, especially price tag and work share demands,” said Richard Aboulafia, an analyst with the Teal Group in the United States.

He said the F-35 program was facing scrutiny from American lawmakers and officials who want to trim hundreds of billions of dollars from the defense budget over the next decade.

Boeing’s loss of the order would be a real setback for the company’s prospects in the fighter business, especially since there were few other large competitions open, said Loren Thompson of Lexington Institute. “The market place is signaling to Boeing that its days in the fighter business may be numbered,” Mr. Thompson said.

Three Japanese firms — Mitsubishi Heavy Industries, IHI and Mitsubishi Electric, will participate in the production and maintenance of the F-35, the Defense Ministry said.

 

Article source: http://www.nytimes.com/2011/12/21/business/global/japan-picks-lockheed-fighter.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,