Airbus: a solid quarterly performance in a constrained environment

(AOF) – The Airbus group (+0.02% to 106.14 euros) earned “solid” results during the first nine months of the year, despite a “complex operating environment”, welcomed Guillaume Faury, CEO of Airbus, commenting on the results of the aeronautics and defense group. Over the period, the group thus had to deal with a supply chain weakened by the cumulative impact of Covid, the war in Ukraine, energy supply problems and constraints on the labor markets.

Despite these difficulties, the group’s adjusted EPS is up by 3.17 euros, compared to 2.95 euros for the same period in 2021. Its adjusted Ebit is up to 3.5 billion euros against 3.4 billion.

Free cash flow before mergers and acquisitions and customer financing was 2.9 billion, compared to 2.3 billion in the first 9 months of 2021. The adjusted Ebit of the group’s commercial aviation activities increased increased to 2.87 billion, compared to 2.73 billion as of September 30, 2021.

Regarding the results for the third quarter alone (July-September 2022), UBS notes that the manufacturer missed its adjusted Ebit target of 887 million euros by 6%, achieving 836 million euros driven by the commercial aviation. This nevertheless represents a growth of 26% compared to the same period in 2021.

UBS also notes that over the period, free cash flow was solid, standing at 0.94 billion euros, against a consensus of 0.51 billion euros, partially supported by favorable exchange rates. For its part, the broker Stifel remains Buy on the stock with a target price of 135 euros.

Gross orders for commercial aircraft reached 856 units (compared to 270 aircraft last year at the same time) with net orders of 647 aircraft after cancellations (133 aircraft in the first 9 months of 2021). The backlog stood at 7,294 commercial aircraft at the end of September 2022.

Airbus Helicopters recorded 246 orders net of orders, versus 185 units as of September 30, 2021), with reservations well distributed between programs.

Airbus Defense and Space order intake reached 8 billion euros (10.1 billion euros in the first 9 months of 2021), which corresponds to a book-to-bill ratio slightly lower than that of the last year. It is slightly above 1. Order intake in the third quarter of 2022 mainly relates to service activities across the division’s portfolio.

On this basis, the company maintains its objectives of reaching around 700 commercial aircraft deliveries and around €5.5 billion in adjusted Ebit in 2022.

The company now targets free cash flow before mergers and acquisitions and customer financing of around 4.5 billion euros in 2022.

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Key points

– Aircraft manufacturer co-world leader with Boeing, born in 1949 under the name Aérospatiale, diversified into satellites;

– Turnover of €52.1 billion, drawn from civil aircraft at 67%, defense & space activities at 21% and helicopters at 12%;

– Order book of €373 billion, 29% from Asia-Pacific, 30% from Europe, 21% from North America, 9% from the Middle East and 5% from Latin America;

– Business model of offering safe and environmentally friendly aeronautical and space solutions, with a strong commitment to society and public services;

– Open capital with strong positions of the French, German (11% each) and Spanish (4%) States, the 9-member Board of Directors being chaired by René Obermann, Guillaume Faury being Managing Director.

Challenges

– “Next chapter” initiative based on 3 pillars -simplification, strengthening and growth- and aiming to create a more profitable, more resilient and leading company in the decarbonization of the industry;

– Innovation strategy integrated into the business model and supported by €2.9 billion in R&D: “Fast-Track” roadmap prioritizing electrification, industrial systems, connectivity, autonomy, hardware and artificial intelligence / “CRT” organization focused on disruptive technologies, associated with external partnerships / structuring: E-Fan Family, ATTOL Fello’Fly, ACIC, TELEO, ACUBED, BIZ Lab, etc.;

– Environmental strategy with the ambition to become No. 1 in carbon-free aviation: design of a “ZEROe” aircraft with hybrid-hydrogen fuel,

/ integration into the reporting of emissions emitted by customers / launch of 2 development centers for hydrogen engines in France and Germany / proliferation of initiatives -High5+ for reducing emissions and waste during the production process, Sentinel 5P of data on the ‘air, Air Race E…;

– Ramp-up of activity: resumption of hiring and monthly production rate estimated at 65 aircraft in 2023 against 45 in 2021;

– Visibility of the activity with order intake of €62 billion at the end of 2021, bringing the order book to €398 billion and a firm order for 80 A320s by an Asian company.

Challenges

– Expectation for 2023 of the resumption of air traffic at 2019 levels;

– Impact of the Russia-Ukraine war: search for new sources of titanium supply in the medium term and suspension of orders for large air carriers by Aeroflot;

– Evolution of legal cases, with the German OHB and Qatar Airways;

– 2022 objectives: after the return to net profitability last year, delivery of 720 civil aircraft, increase in operating profit to €5.5 billion and free cash flow to €3.5 billion.

The end of a duopoly?

For several decades, the American Boeing and the European Airbus have shared 99% of the world market for airliners with more than 110 seats. This market weighs more than 100 billion dollars per year. However, this duopoly seems to be weakened in 2022 for several reasons. First, for the first time, two medium-haul single-aisle aircraft, the Chinese Comac’s C919 and the Russian Irkut’s MC-21, are about to enter service. Added to this is the Boeing 737 MAX crisis. With the cessation of deliveries of this aircraft between 2019 and 2021, the production balance has been broken. In 2021 Boeing posted 340 deliveries, with Airbus remaining well ahead with 611.

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Airbus: a solid quarterly performance in a constrained environment


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