EADS unveiled a 77 % drop in third-quarter core earnings today, as it battled a downturn in civil aviation and damaging delays to its A400M programme.
Europe’s largest aerospace group said earnings before interest and tax (EBIT), or operating income before impairments and certain exceptional items fell to €201 million.
Analysts polled by Reuters had forecast a 48 % drop to €296 million.
The group declined to give estimates for full year profitability, citing uncertainty over the magnitude of potential charges for the high-profile and much-delayed A400M and A380 programmes.
The group said third-quarter EBIT last year had been supported by €965 million from the revaluation of loss-making contract provisions at the closing spot rate.
The Airbus parent took a further €224 million in provisions in the first nine months of 2009 for delays to its A400M military transport project, on top of the €2.3 billion already booked.
EADS is taking minor provisions each quarter pending a contract renegotiation that could lead to a final assessment of its losses on the troubled defence deal, expected later this year. At the half-year stage it also warned of charges in the second half on the A380, whose production costs are over budget.
Group revenues slid 2 % to €9.528 billion in the third quarter, and the group posted a net loss of €87 million, EADS said in a statement.
EADS said the continuous weakening of the dollar was “challenging” its performance “because of a weakening hedge book over time”. It added that its long-term hedging policy meant it was not a short-term threat.
Besides a downturn in aviation demand, EADS has been feeling the pinch from a weak dollar coupled with declining foreign exchange hedge rates and higher R&D expenses.
EADS said oil price increases and the wider economic environment created a risk for commercial aircraft customers. “Nevertheless, the group is cautiously envisaging an improvement of the economic and market conditions in the next months.”
EADS maintained its estimate of up to 300 gross aircraft orders in 2009 and said it expected to deliver around 490 aircraft this year. It said it was still working with customers to establish a delivery target for 2010, including the A380 superjumbo programme.
Pic: Airbus A380 plane