EADS Reports $1.01 Billion Loss in 4Q

Associated Press | By MATT MOORE 03.09.07, 4:33 AM - - ETA weaker dollar and major delays at its Airbus unit dragged annual profit down at EADS, the company said Friday, as it posted a multimillion-euro (-dollar) quarterly loss and warned that Airbus would display another substantial loss in 2007.

EADS NV lost euro768 million ($1.01 billion) in the fourth quarter, compared with a profit of euro405 million a year earlier. Sales during the quarter, however, were up 11 percent to euro11.96 billion ($15.73 billion), from euro10.76 billion in 2005.

Shares of EADS fell 2.9 percent to euro23.01 ($30.26) in opening trading in Paris, and initial reaction was negative.

"We do not think these results are OK," ABN Amro said in a research note to investors.

The European Aeronautic Defence & Space Co. said the effects of a series of management and financial crises, including a two-year delay to the double-decker A380 superjumbo that has wiped more than euro5 billion ($6.58 billion) off profit forecasts, and charges at its A350 XWB program hurt fourth-quarter profits.

Adding to that were higher research and development costs, the company said.

Officially launched in December, the euro11.6 billion ($15.26 billion) A350 XWB program promises better fuel efficiency and greater use of composites than the earlier version of the plane, but with later availability.

So far, Finnair PLC has agreed to order nine of the planes, and Airbus is in talks with other airlines about converting 93 outstanding A350 orders for the widebody model.

But the new Airbus jet is five years behind its rival, Boeing Co.'s 787 "Dreamliner," which already has notched up 464 firm orders as the U.S. company prepares to begin building the plane in the second quarter, with the first flight scheduled for August.

Airbus posted a fourth-quarter operating loss of euro1.72 billion ($2.26 billion) compared with a euro453 million operating profit in the same period a year ago. During the fourth quarter EADS bought BAE Systems PLC's 20 percent stake in Airbus for euro2.75 billion ($3.62 billion).

Sales rose 8 percent to euro6.6 billion ($8.68 billion) compared with euro6.14 billion in the fourth quarter of 2005.

For the year, Airbus, based in Toulouse, France, had an operating loss of euro572 million ($752.3 million) compared with a profit of euro2.3 billion in 2005. Sales rose 14 percent to euro25.2 billion ($33.14 billion), compared with euro22.2 billion in 2005.

New orders for planes reached 790 in 2006, compared to Boeing's 1,044.

Overall, EADS earned euro99 million ($130.2 million) in 2006 compared with euro1.67 billion in 2005. Analysts polled by Dow Jones Newswires had expected a 2006 net profit of euro39 million ($51.29 million).

Sales rose 15 percent to euro39.4 billion ($51.82 billion) from euro34.2 billion a year earlier, helped by an increase in Airbus airplane deliveries to 434 from 378 a year ago.

Co-chief executives Tom Enders and Louis Gallois said the results were hampered by Airbus, but predicted the recently announced Power8 restructuring plan would help return the unit to profitability.

"It will take some time, but Power8 will make Airbus substantially more integrated and efficient," the pair said in a statement. "For 2007, our priorities are to drive operational improvements, restore the group's credibility and build a leaner and more dynamic EADS."

Airbus plans to cut 10,000 jobs and spin off or close six of its European manufacturing plants under the auspices of the Power8 plan, which was unveiled Feb. 28.

Three sites making wing and fuselage parts in Britain, France and Germany are earmarked for sale to new investment partners as Airbus follows in Boeing's footsteps by seeking risk-sharing partners to finance more of its programs.

Airbus has said potential investment partners include Britain's GKN PLC, Italy's Finmeccanica SpA and U.S.-based Spirit AeroSystems Holdings Inc. - a former Boeing division that was renamed after its sale to investment firm Onex and remains a major Boeing supplier.

The plan has caused political disagreement between Germany and France, with the German government endorsing Power8 as a chance to make the planemaker more competitive, and French politicians looking for ways to circumvent job losses.

Before France's April 22-May 6 two-round presidential election, most candidates have pushed for state intervention to help rescue the company from its troubles.

The French government currently owns 15 percent of EADS, while Paris-based Lagardere SCA owns 7.5 percent. Their combined stake is balanced by German-American automaker DaimlerChrysler AG, which holds 22.5 percent of voting rights in the defense group.

Looking ahead this year, the company said it expected to post a single-digit increase in revenue, and said Airbus revenues would likely remain stable based on an expected 440 to 450 deliveries this year.