LONDON — Eurocopter order cancellations and A400M cost overruns remain troublesome areas for EADS, although in reporting first-quarter results, the aerospace giant signals that it sees an overall improvement in business conditions.
Eurocopter saw 18 cancellations in the quarter, down from the level of a year earlier. And while demand is improving over 2009, EADS warns that “commercial appetite is still far below 2007 and 2008 levels.” Deliveries also declined, to 86 units from 93.
As for the A400M military transport, a formal agreement to cover cost overruns is not yet finalized. In March, government and industry agreed in principle on how to share the extra costs. But translating that into a contract is taking more time than hoped. EADS Chief Financial Officer Hans-Peter Ring acknowledges that “we are not progressing at the pace we would like.” However, he stresses “we are progressing.”
Nevertheless, in a statement, EADS CEO Louis Gallois says: “I am cautiously optimistic that our industry is slowly on its way back up. Economic indicators signal a recovery trend of the global economy.” However, he warns, “recent turbulence on the financial markets also reminds us that the crisis is not yet fully behind us.”
The recent strengthening of the dollar against the euro has opened the door for EADS to improve its hedge book. In the first quarter, the company has secured €12 billion in further hedges at a rate of $1.39 per euro. But the spot rate of $1.27 per euro also means the mark-to-market value of the hedge book is a negative €1.6 billion — a €300-million worsening compared with the 2009 year-end situation.
For the first quarter, EADS reports revenue of €9 billion, up from €8.5 billion for the first three months of 2009, and net income of €103 million, down 39%, in part because the current hedge position compared to last year’s first quarter has worsened.
Astrium revenues were up 2%. Order intake fell sharply, to €1.2 billion, but largely because last year’s first-quarter figure was inflated by booking the order for 35 Ariane 5 launchers. The Defense & Security operation saw revenue slightly down, at €928 million. EADS’s business also was hit by a lower contribution from Dassault, in which it holds a 46% stake.