Airbus slowdown will be drag factor on EADS profits

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The Independent Online

The European defence and aerospace group EADS cautioned yesterday that a decline in deliveries of Airbus aircraft and heavy development spending on the A380 super-jumbo would dent operating profits this year.

Nevertheless EADS, which holds an 80 per cent stake in Airbus, said it still expected to increase profits by about 20 per cent to €1.7bn (£1.1bn) compared with €1.4bn last year thanks to the turnaround in its troubled space business. Revenues would be stable at €29bn to €30bn.

The profits forecast was below analysts' expectations of earnings this year of €1.8bn before interest, taxes, amortisation and exceptionals, and EADS shares dipped 2 per cent initially before closing unchanged.

EADS said it expected Airbus production to come in at close to 300 aircraft this year compared with forecasts of slightly over 300 deliveries in 2003. It said the "slight decline" coupled with spending on the A380, which will peak this year at more than €1bn, would hamper profits for the year.

Airbus revenues would also be affected by the weakness of the US dollar, the currency in which all commercial aircraft are sold. EADS is assuming an exchange rate of $1.20 to the euro this year against $1.10 last year. The group offsets its exposure to the US currency by paying in dollars for materials to the value of a third of its turnover.

Analysts attributed some of the dip in Airbus profits this year to the fact that deliveries would include A320 aircraft sold to the no-frills carrier easyJet at discounted prices.

EADS's space division is expected to achieve break-even in 2004 after a sweeping restructuring last year. Increased production on a number of military programmes, including missiles, the A400M military Airbus and NH90 and Tiger helicopters, would also contribute to profits growth.