AP Business Writers
PARIS — EADS, the parent company of planemaker Airbus, said Wednesday its profit surged in the second quarter as cost savings and higher deliveries offset a big charge for delays to its groundbreaking A380 jumbo jet and further woes from the falling dollar.
Boeing’s chief rival warned, however, that it was remaining cautious for the full year because of possible further delays in another new aircraft program, the A400M military transport plane, and EADS shares fell as the company said its strong first-half performance might not be repeated in the second half.
European Aeronautic Defense &Space Co. NV said net profit for the three months to June rose 46 percent to 118 million euros ($185.32 million) compared with 81 million euros a year earlier. Revenue advanced 5 percent to 9.89 billion euros ($15.53 billion).
EADS did not change its guidance for revenue and earnings this year.
Airbus’ underlying earnings looked “very good,” Societe Generale analyst Zafar Khan said, raising the question of why the company hasn’t raised its earnings guidance. “A target of 1.8 billion euros ($2.83 billion) for the year suggests only 600 million euros ($942 million) in the second half, or half the first half level,” Khan said, referring to the company’s target for earnings before interest and tax.
EADS Chief Executive Louis Gallois said the group “decided to stay on the conservative side because of our past track record,” although he granted there was “upside potential” to the group’s forecast.
Speaking on a conference call with analysts, Gallois said part of the firm’s concern for the second half centered on delays in its A400M military transport plane. The first test flight of the A400M, which it describes as Europe’s most ambitious military procurement program ever, has been pushed back to mid-August from mid-July, Gallois said.
“This means we are losing time,” Gallois said. “There is no direct cost overrun linked to that, but you know when we delay milestones in the program it could trigger some expenses.”
The second-half performance also hinges on airlines’ reaction to the global economic gloom, Gallois said. “The next few months will be decisive in seeing how airlines adapt,” he said. “We will remain vigilant.”
EADS did raise its expectation for aircraft orders this year, saying it expects Airbus to capture more than 850 orders in 2008, 150 more than it predicted in May.
“Our order book is at a record level,” EADS CEO Louis Gallois said in a statement.
At the end of June, EADS’ order book was worth a record 354.2 billion euros ($556.27 billion).
EADS’ results contrast with those of Boeing, which reported a 19-percent decline in second-quarter profit to $852 million (542.5 million euros) because of late delivery of military aircraft and rising costs from the postponed introduction of its 787 jetliner.
EADS said it booked a charge of 715 million euros ($1.1 billion) to cover compensation for late delivery of its A380 superjumbo. The changes to the delivery schedule were announced in May, but at that stage the financial impact was not calculated.
Analysts also expect EADS to take a charge for delays to the A400M. “I expect this will probably be made in the second half,” Khan said.
The quarterly results take EADS’ first-half profit to 403 million euros ($632.91 million), more than triple results in the same period of 2007, when Airbus was burdened by heavy restructuring provisions and launch charges for its A350 medium capacity jet. Revenue in the first six months advanced 8 percent to 19.74 billion euros ($31 billion).
EADS said the dollar’s slide against the euro knocked 700 million euros ($1.09 billion) off profits in the first half.
Unlike its U.S. rival, many of Airbus’ costs are in euros, though it sells its planes in dollars. EADS claims every 10 cent drop in the dollar cuts 1 billion euros ($1.57 billion) from earnings.
To compensate EADS is seeking an additional 1 billion euros ($1.57 billion) in savings in 2011 and 2012. That is on top of its restructuring program, dubbed Power-8, which aims to shed 10,000 jobs and reduce annual spending by 2.1 billion ($3.3 billion) by 2010.
Gallois’ hopes to move more of EADS costs into the dollar zone suffered a setback when a $35 billion (22.29 billion euros) competition it won to supply the U.S. airforce with fueling tankers was reopened.
EADS said it is still “confident” of winning the deal.
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