EADS profits soar 39%, set to buy BAE Systems' 20% stake

EADS profits soar 39%, set to buy BAE Systems' 20% stake

	Published : Fri, 10 Mar 2006 06:15 By : James Rowe Print this Story

PARIS: European aerospace and defence group EADS reported a 39 per cent increase in its 2005 full year profits at 1.68 billion euros, up from a restated 1.2 billion euros for 2004. Market expectations were for the group to notch a profit of 1.38 billion euros.

The company, 80 per cent owner of Airbus, said its financial performance has been largely due to record deliveries during the year under review at its Airbus unit and a 289-million-euro accounting boost.

The company said its operating profit rose 17 per cent to 2.85 billion euros against a consensus estimate of 2.75 billion euros, echoing the company's own revised forecast in November. Its sales reached 34.21 billion euros.
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Improved financial results and a different accounting treatment of an option linked to BAE Systems' 20 per cent stake in Airbus, which contributed the 289 million euros to the bottomline, helped increase net profits, the company said.

It has a net cash of 5.49 billion euros at end-2005, up from 3.96 billion euros in the previous year, from deposits made against aircraft orders by international carriers.

EADS expects it revenues to rise to 37 billion euros in 2006 as Airbus deliveries are expected to increase by at least 10 per cent and an operating profit of 3.2 billion euros to 3.4 billion euros.

Analysts point out that the profits clearly reflect the recovery in aircraft industry, which is now flush with new orders. Airbus retained its No 1 position in the market in 2005 after a close race with Boeing. It had record net orders for 1,055 aircraft in 2005, and it is in the process of manufacturing new aircraft, including the A380 freighter version and the twin-aisle A350 airliner.

The two chief executives of EADS, Thomas Enders and Noel Forgeard, said in a statement that there could be a bounce-back by Boeing and a strain on the company's resources as it works on new projects alongside the A380 superjumbo.

"The cyclical upturn is lifting our earnings and we believe the record order book and vibrant customer demand point to sustained high deliveries at Airbus. Profitability at Eurocopter and at our combined defense and space businesses is also on a clear upward trend.

"We must, however, remain mindful of the challenges ahead: the weak dollar, the revived competition in the commercial aircraft arena, the ramp-up of new programs and stretched resources."

Meanwhile, Chinese news agency Xinhua said China Aviation Industry Corporation and EADS' Eurocopter division are investing 200 million euros each in a joint venture to develop and build Eurocopter 175, a civilian aircraft. The production facilities will be located in Harbin in China.

Even as the financial results were being announced, newspapers in Britain disclosed the company is set to buy BAE Systems' stake in the company. It will make use of the cash in hand for this purpose. The stake is valued around 3.5 billion euros. BAE would make use of the funds to expand its U.S. operations and also in buyouts, the reports said.

The company has proposed a 30 per cent increase in dividend to 65 European cents.

EADS shares were up 1.73 per cent, valuing the company at over 26 billion euros.