EADS raises its profit forecast for 2012

EADS RAISED its profit guidance for 2012 yesterday but took a €158 million charge against its first quarter earnings to fix an embarrassing wing crack problem on the A380 superjumbo.

The aerospace and defence group said the cost of repairing the wing cracks is expected to increase to €260 million over the full year, following a €105 million charge in 2011, and warned the issue would also be a drag on earnings in 2013.

Airbus, the group subsidiary that makes the A380, is still seeking to deliver 30 superjumbos to customers this year but EADS said the target was “becoming more challenging”.

Production of the A380 is being slowed for part of this year as Airbus fixes the wing crack problem.

Nick Cunningham, analyst at Agency Partners, said the full cost to EADS of repairing the wing cracks could be more than €500 million and did not include the possibility of Airbus paying compensation to airlines.

EADS reported revenue of €11.4 billion for the three months to March 31st, up 16 per cent compared with the same period last year and well ahead of analystsexpectations.

The group swung from a net loss of €12 million one year ago to a net profit of €133 million in the first quarter of this year. Earnings per share were €0.16, compared with a loss of €0.01 a year ago.

EADS increased its profit guidance for 2012, saying earnings per share before exceptional items should be €1.85, rather than the €1.65 previously stated.

But the results were overshadowed by the wing crack problem on the A380.

The discovery last year of cracks on L-shaped brackets called rib feet that connect the A380 wing’s internal structure to its skin has created tensions with some of Airbus’s most important customers.

Emirates Airline, the world’s biggest A380 operator, has complained about having to ground six superjumbos at a time to carry out temporary fixes to the cracked rib feet.

EADS said a “final fix” to the problem had proved to be more complex than anticipated and so it would take a €158 million one-off charge against earnings in the first quarter. – (Copyright The Financial Times Limited 2012)