The second quarter of 2016 may indicate that Airbus has brightened its prospects for the second half of the year. But it’s not a slam dunk.
Airbus took a charge of €1.4 billion for problems related to its A350 program and its A400M military transport. Both have been anchors dragging on profits for a long time, and while the company believes it will deliver on its growth plans, all the problems have not yet been solved.
In the first half of the year, Airbus has delivered just 12 A350s, about half the total it should have if it expects to meet its forecast for annual deliveries of 50. Supply chain problems, primarily related to seats and lavatories, have left upward of 40 A350s on the parking lot.
Earnings per share (EPS) totaled €1.76, up 89% compared with the year-ago quarter, but revenues dipped by 1% to €16.57 billion. For the first half of the year, revenues are flat and EPS is up 17% to €2.27.
CEO Thomas Enders said:
Our operational focus remains squarely on the A320 and A350 ramp-ups and transition to the new engine version of the A320.Unfortunately, we have to cope with new charges on the A400M and A350 programmes. Significant capital gains from the portfolio reshaping mitigated these programme losses but that does not make them more acceptable! Industrial efficiency and the stepwise introduction of the A400M’s military functionalities are still lagging behind schedule and remain challenging.
The capital gains Enders is referring to are from the sale of its stake in Dassault Aviation, which Airbus sold for €2.4 billion in June.
Airbus continues to expect to deliver more than 650 aircraft in 2016, and it reiterated its statements that the commercial division’s backlog will grow. The company expects its full-year earnings before interest and taxes (EBIT) to be “stable” and says the same thing about earnings per share. The company also expects free cash flow, before M&A, to be “stable,” although “delivery re-scheduling makes the achievement of the 2016 free cash flow guidance more difficult.”
Airbus stock traded up about 5.2% in Paris Wednesday, at €54.39 in a 52-week range of €48.07 to €68.50.
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