EADS hopes for profits

Earnings from Airbus promise fat future profits

The European aeronautics and defence group EADS has reported strong underlying profits and good growth prospects but says it will slash 3,000 jobs.

While there was a heavy net loss for 2000 of 909m euros ($816m, £570m), due to the weak euro against the dollar, operating profit rose by 11% to 1.4bn euros ($1.26bn, £879m).

These are the first set of annual results since Dasa of Germany, Aerospatiale Matra of France and Casa of Spain merged and floated last year.

The company said the loss was due to 1.4bn euros in charges because of the high value of the dollar against the euro and charges from changes in the accounting systems because of the merger.

The restructuring programme, including the reduction in head office staff, is expected to be completed in 2002.

The Airbus consortium, of which EADS holds 80%, contributed the bulk of the profits and losses came from the restructuring of its aerospace and defence divisions and depreciation of its Global star satellite programme.

Defence plans

Analysts looking for signs of how EADS plans to beef up its military business, which is dwarfed by its civilian activities, were disappointed.

EADS ruled out an exclusive relationship with US military partner Northrop Grumman and one of its two chief executives, Rainer Hertrich, said it was willing to work with anyone.

Its other chief executive, Philippe Camus, said the company's defence sales were about five billion euros a year, which is less than 20% of the total.

Announcements are expected soon on European joint ventures to build missiles that will rival Raytheon and a next generation fighter to rival the Joint Strike Fighter to be built by Boeing, Lockheed Martin, Northrop Grumman and the UK's BAE Systems.

Buy recommendation

Shares in EADS have been recommended as a strong buy by Lehman brothers.

"We believe that strong earnings momentum, a relatively low valuation and continuing good news flow will continue to drive the share price higher," said Lehman Brothers analyst Colin Crook in a briefing note.

He added that the company reported a record order backlog, and that Airbus's improved profitability was coming through quicker than expected.

He said the key issue for 2001 was not Airbus's expected softer order intake but its rising sales and margins.