Commercial Sales Lift EADS ; Profit Rose 19% in 2012 for Parent of Airbus Even as Military Side Struggled

By Clark, Nicola | International Herald Tribune, February 28, 2013 | Go to article overview

Commercial Sales Lift EADS ; Profit Rose 19% in 2012 for Parent of Airbus Even as Military Side Struggled


Clark, Nicola, International Herald Tribune


The company says it made EUR 1.2 billion in 2012, thanks to commercial aircraft sales, even though its military segment struggled under the weight of budget troubles in the United States and Europe.

European Aeronautic Defense & Space, the parent company of Airbus, reported on Wednesday a 19 percent increase in net profit for 2012, propelled by sales of commercial jets and helicopters, while its military business continued to struggle as budget pressures squeezed U.S. and European military spending.

The company, based in Toulouse, France, said earnings for the full year climbed to EUR 1.2 billion, or $1.56 billion, from just over EUR 1 billion in 2011, on a 15 percent rise in revenue, to EUR 56.5 billion. 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 civilian aircraft, while military orders stalled. Airbus, which increased its commercial jet sales 19 percent, represented 68 percent of group revenue, 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. government, the world's biggest spender on military equipment, 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 share 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 least 40 percent of military revenue 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 U.S. rival, Boeing -- which derives 40 percent to 50 percent of its revenue from military sales -- was growing increasingly reliant on its civilian 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 military 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 57 percent to EUR 142 million, in large part because of nearly EUR 200 million in charges linked to the restructuring.

Analysts warned that the outlook for EADS's military 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. …

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