EADS Raises Its 2004 Profitability Target

2000 EBIT of € 1.4 billion (pre goodwill and exceptionals)

Restructuring charges of € 152 million included

Strong net cash position of € 2 billion

Dividend proposal of € 0.50 per share

CEOs: “We are proceeding along our path of profitable growth with 15 % increases expected in EBIT and revenues in 2001“

EADS European Aeronautic Defence and Space Company (stock exchange symbol: EAD) expects to achieve an EBIT margin of 10 % in 2004, raising its previous target of 8 %. This target includes the Research and Development costs for the Airbus A380 aircraft. The expected improvements in Earnings before Interest and Taxes, (EBIT, pre goodwill and exceptionals), will result from higher growth in business, the positive effects from the EADS merger and a stronger US Dollar rate.

In 2000, EADS increased its profitability. At its Annual Press Conference in Amsterdam on March 19, the company reported pro forma EBIT of € 1.4 billion for the full year 2000. This is an increase of 11 % compared to the 1999 pro forma figure of € 1.26 billion, adjusted for the financial gain of € 182 million from the disposal of Sextant in 1999.

This 2000 EBIT figure already includes a € 152 million deduction for restructuring costs relating to the Defence and Civil Systems division, EADS headquarters, and the Space division.

Since the merger in July 2000, the corporate functions of the three founding companies have been combined. Initially, processes and systems were merged in order to unify the new company. Now that the corporate entity is established and this first step completed, the numbers of the headquarters staff, as well as its functions and roles, will be streamlined. With a focus on improving efficiency, EADS intends to significantly reduce corporate headcount, by moving some functions to the operating units and outsourcing or reducing others. The implementation of this restructuring will start immediately and be completed by the year 2002.

The EADS Board of Directors will propose a dividend of € 0.50 per share for the business year 2000. Shareholders will have to vote on this proposal at the Annual General Meeting in Amsterdam on May 10, 2001.

EADS Chief Executive Officer Philippe Camus said: “The figures presented today demonstrate that EADS delivered and even exceeded its first business year profit targets, proving that our merger is already a success. For the future, the record level of orders gives us an exceptional visibility. In 2001, we will consolidate 100 % of Airbus Integrated Company and expect to continue on our path of profitable growth with EBIT and revenues up 15 %. With the dividend proposed to our General Meeting, we want to have our shareholders participate in our success.”

Rainer Hertrich, Chief Executive Officer of EADS, commented on the prospects of EADS: “EADS has clearly established itself as a leader in the global aerospace and defence industry. We are the driving force behind the consolidation of the European aerospace and defence industry. We will continue on that path through Airbus Integrated Company, the European Military Aircraft Company, MBDA and further steps in order to use this as leverage for EADS’ market position and performance. Following our reorganisation and restructuring in the Space as well as the Defence and Civil Systems divisions, we will expand these businesses through both internal growth as well as further acquisitions. EADS is going the step beyond!“

EADS Chief Financial Officer, Axel Arendt, added: “We are very pleased to announce that our results are fully in line with the expectations of the financial community. Our results were achieved despite high restructuring costs included in our financial statements for the year 2000. The restructuring charges are designed to enhance our profitability in the future. EADS is a company that delivers on its promises. We are pleased that this fact has been appreciated by the financial markets with our share price performing impressively better than the major stock market indices.“

Order book covering more than five years of business activity

As already reported, EADS pro forma group revenues for 2000 increased by 7.3 % to € 24.2 billion (1999: € 22.6 billion). The record order intake achieved in 2000 amounted to € 49.1 billion, up 50 %, showing the exceptional performance of the company. At year-end 2000, the order book reached the record level of € 132 billion, an increase of 29 % compared to the 1999 pro forma figure. This order book represents more than five years of business activity.

For the same reasons as in 1999, EADS recorded a negative net income of € -909 million including a net financial loss of € -1.4 billion due to the impact of a higher US-Dollar exchange rate at year-end 2000 compared to 1999 and the accounting principles applied to hedging positions stemming from hedging procedures used before the merger. As in 1999, this effect has no impact on the cash position of EADS. From 2001 onwards, new accounting rules (International Accounting Standards / IAS 39) will enable EADS to allocate nearly all of those hedges to the corresponding underlying commercial contracts, with the effect of dramatically reducing the volatility of the net income due to varying year-end Dollar exchange rates.

At the end of 2000, EADS had a net cash position of more than € 2 billion, an increase of about € 3 billion from 1999. This increase is due in equal parts to the free cash flow improvement and to the capital increase.

Strong results from the Airbus and Aeronautics divisions

Thanks to its strong market performance and increase of aircraft deliveries, EBIT of the Airbus division of EADS rose 53 % to € 1.412 billion (pro forma 1999: € 925 million). This EBIT figure represents the 80 % Airbus share that is consolidated at EADS. As already reported, revenues grew 17.5 % to € 14.9 billion and order backlog reached € 104.4 billion at year end, also representing the 80 % share of EADS. In total, at year-end 2000 Airbus had an order backlog of 1,626 aircraft, covering more than five years of business activity. On top of this, Airbus has now 66 firm commitments for the A380 superjumbo.

The Military Transport Aircraft division recorded a decrease of its EBIT to € -63 million (1999: € -20 million). The division’s major future programme, the Airbus A400M, is still in its pre-development phase, and there are further investments into the C295 military transport aircraft and the aerostructures business. Revenues reached 316 million, and order backlog increased to € 873 million.

The Aeronautics division had a very successful year 2000 with EBIT rising by 47 % to € 296 million (1999: € 202 million). Particularly successful were the Military Aircraft business unit because of the Tornado upgrade programme and Eurocopter’s civil business. The Aeronautics division’s revenues reached € 4.7 billion, up almost 10 % from 1999, and the order book amounted to € 13.1 billion at year end.

Space and Defence and Civil Systems divisions record non-recurring expenses

At the Space division, EBIT decreased by 31 % to € 67 million, net of € 65 million non-recurring costs covering restructuring within the division and the portion of the depreciation of exposure to the Globalstar satellite constellation, which is allocated to the Space division. The continued success of the Ariane programme allowed for the main contribution to the division’s profits. Revenues increased slightly to € 2.5 billion (+0.7 %), while year-end backlog reached € 4.8 billion.

Particularly due to restructuring costs, the Defence and Civil Systems division recorded a loss with an EBIT of € -110 million, following a positive EBIT of € 86 million in 1999. Revenues decreased by 24 % to € 2.9 billion, which is mainly due to the deconsolidation of the telecom joint ventures with Nortel and to the ongoing defence budget constraints in the EADS core countries, especially in Germany. Year-end order backlog reached € 9.7 billion. The implemented restructuring programme will improve the division’s profitability. Strong order backlog will be the basis for renewed growth of this division and a return to positive results by 2002.

EADS was formed on July 10, 2000 following the merger of Aerospatiale Matra of France, DaimlerChrysler Aerospace (Dasa) of Germany and the Spanish CASA. The listing of EADS on the Frankfurt, Madrid and Paris stock exchanges marked the first pan-European offering and one of the largest European listings of the year 2000. EADS is the third largest aerospace and defence company in the world.

1) EBIT (Earning Before Interest and tax) pre goodewill and exceptionals, but incl. 262 million euros of non-recurrent expenses
2) incl. pro forma adjustements / intercompany transactions
3) based on catalog prices