EADS Raises 2002 EBIT Forecast By 20%

EADS (stock exchange symbol: EAD), the world’s second largest aerospace and defence company, has increased its profit forecast for 2002. The company expects Earnings Before Interest and Taxes (EBIT, pre-goodwill and exceptional items) to be 20% higher than the EUR 1.2 billion previously forecasted.

The performance of the Airbus division has been better than expected, despite the market downturn in commercial aviation after 11 September. Due to lower aircraft deliveries and higher Research & Development costs, Airbus’ results in the second half of 2002 will be reduced compared to the first half. For the full year 2002, EADS expects a higher contribution to the Group’s EBIT by the non-commercial aircraft businesses than in 2001. The combined EBIT of these four divisions is expected to improve significantly.The overall effect of these factors will be an enhancement of our 2002 bottom-line profitability compared with EADS’ earlier forecast.

Half-year Earnings Before Interest and Taxes (EBIT, pre-goodwill and exceptional items) reached EUR 775 million. This is in the range of the first half 2001 EBIT (EUR 764 million), despite the general market downturn in civil aerospace and higher R&D costs. EADS published its half-year report on Thursday.

The EBIT of Airbus (including a positive effect of EUR 63 million from the sale of EADS’s participation in the company Aircelle) and Defence and Civil Systems were slightly improved in the first half year. At the same time, EBIT of EADS Group was impacted by risk provisions at the Space division and by a non- recurring charge from the effect of the Fairchild Dornier insolvency, which mainly impacted the Military Transport Aircraft division. The division is a subcontractor for the Dornier 728 programme.

Compared to the same period last year, revenues were kept at an equal level with EUR 14 billion. Reflecting the current lower value of the US-Dollar, EADS expects full-year 2002 revenues to be maintained at a level slightly below the comparable figure of last year.

The EADS CEOs, Philippe Camus and Rainer Hertrich said, “EADS demonstrated stronger than expected performance in the first half of 2002 by successfully managing difficult market conditions particularly in the civil aviation business. We are therefore pleased to raise our EBIT target for 2002 by 20 %. We confirm the forecast of 300 Airbus deliveries in 2002 and 2003, strictly in line with market demand and fully backed by firm orders. Other areas of our portfolio, particularly Aeronautics - with Eurocopter and Military Aircraft - and Defence and Civil Systems are seeing future revenues growth, based on our strong orderbook. Our margins and our cash position remain solid.”

The CEOs continued, “Looking ahead, we remain prudent and carefully watch the developments of the civil aviation sector which we see slowly recovering. Key drivers of continued profitability will be Airbus, the profitability of our Aeronautics division and the expected break-even for Defence and Civil Systems for the full year.”

EADS’ Net Cash position remained strong with EUR 1.4 billion, after a dividend payment to shareholders of EUR 404 million in the second quarter.

By year’s end, EADS is targeting a positive Net Cash position.

The budget for customer financing is lowered from a maximum of EUR 1.8 billion to EUR 1.2 billion for the full year 2002.

The strong Net Cash position confirms the ability of EADS to continue to self-finance large projects and investments.

Net Income pre goodwill and exceptionals reached EUR 462 million by June 2002, comparable to the EUR 456 million figure in the first half of 2001. Earnings per share pre-goodwill and exceptional items amounted to EUR 0.57 (first half 2001: EUR 0.56).

Net Income after goodwill and exceptionals amounted to EUR 91 million in the first half 2002 compared to EUR 1,657 million in the first six months of 2001. The difference of EUR 1,566 million is mainly due to the exceptional gain coming from the creation of the integrated Airbus SAS in 2001.

With EUR 14.8 billion, order intake in the first half 2002 exceeded revenues. Total orderbook now amounts to EUR 173 billion (EUR 179.5 billion at the end of March 2002), influenced by the revaluation versus year-end of the US-Dollar denominated Airbus orderbook. Recent successes will further enhance this backlog substantially, as well as strengthen and drive growth in EADS’ defence business: the participation in Skynet 5 (the UK Ministry of Defence’s secure satellite communications programme) and Deepwater (the US Coastguard’s capability replacement programme), the pre-selection of Eurofighter for export to Austria and the anticipated order for the A400M military transport aircraft programme, which have not yet been booked in the order intake.

Thanks to its hedging strategy, EADS secures its operational results in the short and medium term against currency fluctuations. According to EADS CFO Axel Arendt, “A stronger Euro will not influence EADS’ profits for 2002 and 2003 thanks to complete hedging coverage. Looking ahead, EADS has used the period of a strong Dollar to hedge a significant portion of 2004 and 2005 and to secure US-Dollar rates that are significantly more favourable than current market rates. We also have substantial hedging in place for the longer term, including the first firm A380 deliveries, at US-Dollar rates that are far better than our initial business plan assumptions.”

Airbus achieved an EBIT of EUR 874 million in the first half of the year, including a positive effect of EUR 63 million from the sale of EADS’ participation in the company Aircelle. Compared to the first half year 2001 (EUR 797 million), this is an increase despite higher R&D. The division delivered 160 aircraft (first half 2001: 162), resulting in revenues of EUR 9,870 million (first half 2001: EUR 9,982 million). The Airbus orderbook amounts to 1,519 aircraft, with 107 new orders during the first half of 2002, representing more than five years of production at current levels.

The Military Transport Aircraft division recorded an EBIT of EUR -72 million. EADS provisioned all risks from its investment as a subcontractor mainly for the wing and tail of the Dornier 728 programme of insolvent Fairchild Dornier, which amount to EUR -54 million, in the division’s EBIT. EBIT without this non-recurring event is on the same level as in last year’s first half (EUR -21 million). Revenues increased by 20% to EUR 234 million from EUR 195 million in the first six months of 2001 thanks to the ramp-up of C295 and CN235 deliveries. The A400M programme with a volume of EUR 18 billion, which is expected to be confirmed soon, will be of major importance for the development of the activity and profitability of EADS’ Military Transport Aircraft division.

At the Aeronautics division, EBIT reached EUR 63 million (first six months 2001: EUR 85 million). The result was impacted by lower activity in the civil aviation aerostructures and maintenance businesses. The division is subject to strong seasonal influences, with the second half year being typically significantly stronger than the first half. Revenues increased to EUR 2,226 million (first half 2001: EUR 2,020 million).

EBIT at the Space division was negative at EUR -85 million, mainly because the markets continue to be extremely weak. The result was further impacted by risk provisions for some satellite programmes particularly in telecommunications and by the depreciation of assets. A comprehensive restructuring plan is now in place at Astrium and cost cutting programmes in our launcher business are currently implemented, as first steps before a comprehensive reorganisation of the entire division. Revenues decreased to EUR 882 million from EUR 1,054 million in last year’s first half. Higher revenues, especially from the satellite institutional business, are expected during the second half of 2002.

At the Defence and Civil Systems division, EBIT improved to EUR -71 million compared to the first half year 2001 (EUR -128 million) thanks to the first effects of the past year restructuring. The result of the division is also affected by high seasonality effects with the second half year generally stronger than the first half. EADS expects that the division will achieve EBIT break-even for the full year 2002. EADS is expecting the signature of the Meteor missile programme within 2002. Revenues in the first six months amounted to EUR 1,245 million (first half 2001: EUR 1,358 million).

EADS is the largest European aerospace company and the No 2 worldwide. The company has a workforce of more than 100,000. It is active in the sectors of commercial aircraft, helicopters, space, military transport and combat aircraft as well as defence technology and services. Among others, EADS holds 80 percent of Airbus, 75 percent of the space company Astrium, 100 percent of the helicopter manufacturer Eurocopter, 43 percent in the Eurofighter programme and 37.5 percent in the missile company MBDA.

Eckhard Zanger
EADS Communications Finance
Tel. +49 89 607 27961

1) Earnings before interest, taxes, depreciation and amortization
2) Earnings before interest and taxes, pre-goodwill amortization and exceptionals
3) Order intake and order book based on gross prices

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