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EADS Doubles Dividend; Profit to Surge on Airbus

Published: March 8, 2012 | 10:23 am
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European Aeronautic, Defence & Space Co. doubled its dividend payout and predicted earnings will surge this year as its Airbus SAS aircraft division lifts output and demand for commercial helicopters rebounds.

Earnings before interest, tax and one-time items will rise above 2.5 billion euros ($3.29 billion) in 2012, from 1.8 billion euros last year, EADS said in a statement today. Sales gained 7 percent to 49.1 billion euros in 2011, with the company projecting an increase of more than 6 percent this year.

Airbus, the source of two-thirds of EADS revenue, delivered 534 planes last year and is targeting 570 handovers in 2012 as airlines seek newer, more-fuel efficient planes to counter rising fuel prices. EADS said 2012 will bring challenges such as maintaining a “tightening” schedule on its new A350 wide-body aircraft, as Chief Executive Officer Louis Gallois prepares to hand the reins to Airbus Chief Tom Enders.

“It’s clear profits at Airbus will be much higher two to three years from now,” said Nick Cunningham, an Agency Partners analyst in London, with a ’’buy’’ rating on EADS. “It’s pretty mechanical; A380 costs drop off, and as revenues rise steeply, research and development costs won’t go up so sharply, so margins will expand.”

EADS agreed to pay a dividend of 45 cents, more than doubling the pay-out from last year and exceeding analyst estimates of a 30-cent dividend. Shares of the aerospace company have advanced 11 percent this year for a market value of 22 billion euros. The stock jumped 7.3 percent to 28.8 euros in Paris trading as of 9:03 a.m.

Cunningham has set a 35-euro price target for the shares.

Airbus Center Stage
Airbus announced plans today to raise production rates of its wide-body A330 to 11 a month from 9, as the model benefits from slower-than-anticipated deliveries of Boeing Co. (BA)’s 787.

The company, based in Paris and Munich, said profit growth in 2012 will be sustained by volume increases at Airbus and the Eurocopter chopper division, better pricing at Airbus, and as costs for producing the A380 super-jumbo plane come under better control. Airbus delivered 26 of the world’s largest passenger jet in 2011 and aims to lift that number to about 30 in 2012.

“The stage is set for EADS to turn the corner toward increased profitability,” Gallois said in the statement.

The A380 has had to grapple with wing cracks in recent weeks that stemmed from a manufacturing defect. Airbus is in the process of fixing the components and changing future production methods of the wings. The company didn’t say how much the fixes on the aircraft have cost so far, while the company is devoting “maximum attention” to solving the issue.

The A350 jet, which incorporates cutting-edge composite materials, remains “challenging,” EADS said. The company reiterated that it plans to enter the jet into service in the first half of 2014, saying the “schedule is tightening.”


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