PARIS, Feb 15 — Airbus took a €1.3 billion (RM6.33 billion) hit on its delayed A400M military transport plane in 2017, lifting charges on Europe’s largest defense project above 8 billion euros and clouding higher than expected underlying profits.
Shares in Europe’s largest aerospace group gained 10.5 per cent, touching a two-week high, as Airbus lowered costs on its A350 jet and confirmed it may raise output of the best-selling A320 model by 17 per cent to 70 a month on strong demand.
Chief Executive Tom Enders also predicted a decision this year on whether to increase production of the A350 wide-body jet, Europe’s response to the Boeing 787 Dreamliner.
“It is blatantly clear that the demand is there,” Enders said, adding that Airbus must be careful not to overstretch a supply chain already running flat-out to keep up with demand.
Enders however called on engine makers to tackle delays that have disrupted deliveries of the upgraded A320neo and said its target of 800 total deliveries this year would depend on them.
“We have plenty of challenges going forward, but it is manageable,” he said.
Airbus has been beset by delays mainly from Pratt & Whitney, as well as some delays and issues at engine maker CFM International <SAF.PA> <GE.N> as it upgrades the medium-haul A320, the workhorse of its jet business.
Airbus said it was still looking at the impact of a fresh round of problems with Pratt engines that saw some A320neo jets grounded and certain deliveries halted this week.
Led by its main commercial arm, Airbus posted an 8 per cent increase in adjusted 2017 operating profit of €4.253 billion on flat revenues of 66.767 billion and predicted a 20 per cent rise in the widely watched core profit item helped by accounting changes.
Analysts were on average expecting adjusted 2017 operating profits of €3.996 billion and revenues of 67.343 billion.
The company lifted its dividend by 11 per cent.
Investors cheered stronger than expected cashflow after what its finance director called an “all hands on deck” effort, leaving it with over 13 billion euros of net cash at end-year.
In October, Airbus’ defense unit froze capital spending and urged staff to take “drastic measures” to save cash to avoid missing targets, according to an internal posting.
“The most important item for us and many others is cash and this beat expectations by around 700 million euros or 34 per cent in (the fourth quarter),” Barclays analyst Phil Buller wrote.
Us probe query
The A400M charge comes after Airbus last week reached a provisional agreement with seven European NATO buyer nations over further delays for the new troop carrier..
“This certainly ain’t pretty but we are making good progress overall,” Enders told analysts.
Airbus also took a €117 million fourth-quarter charge following a settlement with German prosecutors over a corruption case linked to a fighter sale to Austria in 2003. The charge includes 35 million euros of ongoing legal costs.
Austria, where prosecutors continue to probe the same fighter deal, said it would review a previous administration’s decision to end the Eurofighter program early.
But the republic’s chief lawyer also said Austria would not consider a new deal with the Eurofighter consortium - which includes Airbus, Britain’s BAE Systems <BAES.L> and Italy’s Leonardo before compensation had been paid.
The fighter row is one of several investigations over the conduct of Airbus’ defense and commercial jetliner activities.
Airbus has been forced to stump up some financing to help airlines after European export credit agencies halted support in 2016, when Airbus acknowledged having misled a UK agency in funding bids, triggering an Anglo-French corruption probe.
Airbus said today it had now reached agreement allowing the export funding to resume on a case-by-case basis.
However, it raised the prospect for the first time that the United States could be drawn into the Anglo-French probe, saying it had been asked to supply information to US authorities about conduct potentially under their jurisdiction. — Reuters