By Andrea Rothman March 9 (Bloomberg) — European Aeronautic, Defence & Space Co. plans to scrap its annual dividend for the first time in its 10-year history after cost overruns on its two largest Airbus SAS plane programs led to a loss. The company posted a net loss of 763 million euros ($1.04 billion), after net income of 1.57 billion euros a year earlier, Paris- and Munich-based EADS said in a statement today. EADS said revenue this year won’t increase and predicted earnings before interest and tax of 1 billion euros. EADS lifted its annual savings target to 350 million euros. The Airbus aircraft unit, which provides about two thirds of EADS’s sales, has grappled with spiraling costs on the A400M military plane as well as the A380 superjumbo, with both projects years behind schedule. EADS said yesterday that it will abandon its bid for the U.S. Air Force’s $35 billion tanker program, saying the selection process favored Boeing Co. EADS declined as much as 93 cents, or 5.9 percent, to 14.95 euros in Paris, and traded at 15.04 euros as of 9:29 a.m. Before today, the stock had gained 7.2 percent since September, while Boeing has increased 33 percent since then. Analysts surveyed by Bloomberg had estimated a net loss of 375 million euros for 2009. For this year, the estimate is for earnings before interest and tax of about 1.49 billion euros. Last-Ditch Accord Airbus reached a last-ditch accord with governments involved in the A400M military plane last week, after threatening to walk away from the program. The accord led EADS to book an additional 1.8 billion euros in charges on the project, on top of 2.4 billion euros taken previously. “Thanks to the agreement between the customer nations and EADS this program is now back on track,” EADS Chief Executive Officer Louis Gallois said in the release. “Although the group has to take an additional significant provision, this stabilizes the program.” Revenue last year fell 1.2 percent to 42.8 billion euros. For 2010, EADS predicted production rates of its wide-body planes will remain at about eight units a month, while the rate of production on its best-selling single-aisle planes will rise to 36 units a month from the end of this year. Tanker Program Northrop Grumman Corp., EADS’s partner in the U.S. Air Force’s tanker program, said it won’t bid, making good on its threat to withdraw from the contest unless the government altered some of its requirements. EADS needed a local partner to compete against Boeing in the program. “That had been well-flagged but it’s still sort of shocking,” said Nick Cunningham , an analyst at London-based Evolution Securities, who recommends investors sell EADS shares. “Don’t regard the tanker as dead, but it’s clearly not feeling very well at this point.” The company booked 240 million euros in charges on its A380 superjumbo plane, and EADS has said the program will remain unprofitable for several years. EADS plans to increase cost savings to 350 million euros each year, from 200 million euros, Gallois told analysts on a call today. EADS’s biggest shareholders include carmaker Daimler AG, the French state and Lagardere SCA. Over the years, Lagardere has whittled its holdings down to 7.5 percent, and Daimler has sold a 7.5 percent EADS stake to a group of German banks and states, while keeping voting control of those shares. Daimler said in its annual report that resolution of the A400M dispute and additional charges may result in “a material negative effect” on earnings in the first quarter. For Related News and Information: Top Stories: TOP Top European Aerospace Stories: TNI ETOP ARO For EADS Earnings: EAD FP TCNI ERN Top Transportation Stories: TRNT
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EADS Axes Dividend for First Time After Loss on Airbus Costs; Shares Drop
