Four years after a merger and flotation that baffled many in the money markets and with another strong set of results under its belt, EADS has won over the investor community, says chief financial officer Hans-Peter Ring.
Explaining EADS not only to "friendly" investors, in the home markets of France, Germany and Spain, but to a potentially more sceptical audience in the UK and USA was always going to be a challenge.
Of the three heritage companies of EADS, one - Aerospatiale Matra - was jointly owned by the French state and a company whose main interest was in publishing; another, DaimlerChrysler, made cars, while Casa was a nationalised industry. EADS effectively went to market - floating around a third of its shares on the Frankfurt, Madrid and Paris bourses - with an unfamiliar name and business and on the cusp of the biggest downturn in the aerospace market in living memory. "We put together three companies and listed without much experience," Ring admits. "We had to educate the investor community and explain some very complex issues like hedging, accounting and consolidation".
During the first three years of EADS, Ring and his senior colleagues took part in a breakneck series of presentations with every quarterly results announcement. Although this has eased slightly now, as the EADS story is more familiar, raising the company's profile - in the USA especially - remains vital for two reasons: one, the country's money markets are the biggest source of finance; and, two, EADS wants to get across its political message that it is a company ready and willing to do business within the USA. US investment funds control over a fifth of the company's public shares - or around 7% of EADS as a whole, a bigger share than the Spanish state's.
The prospect of either DaimlerChrysler or Lagardère releasing more of their shares after the A380 enters service in 2006 opens the possibility of a new issue, but Ring rules out the possibility of a flotation in either London or New York, although he says a US listing "might become an issue if we grew our industrial base there".
EADS has enjoyed solid if not spectacular growth since its creation, a considerable achievement given the state of the aviation sector, the disastrous state of its space business and sluggish defence spending in France and Germany particularly. However, it now feels that, with a number of programmes coming on stream and the aviation market set for recovery, a turning point to stronger growth is on the cards. The latest annual results show revenues stable, at just over €30 billion, but with better than expected earnings before interest and tax at €1.54 billion. However, more encouraging, says EADS, was a doubling of the order intake to just over €61 billion - twice revenues - giving a total orderbook of more than €179 billion. At constant dollar/euro exchange rates, this would have amounted to a 20% increase.
The weakening dollar against the euro has been a serious issue for EADS and Airbus in particular. With sales of just over €19 billion last year, Airbus makes up almost two-thirds of EADS's revenues and its customers largely pay for their aircraft in dollars, while Airbus and EADS's predominantly European suppliers invoice in euros. This has eaten into margins. Despite the fact that EADS has one of the biggest "hedge books" in Europe, with $40 billion of its promised revenue hedged at one to one against the euro, it is a situation Ring would like to change. "We want to get more of our vendors on to a dollar contract," says Ring.
Doing what it says it will do is vital for a company that is still a relative new kid on the block, says Ring. "It is important that investors trust us. Last year this really became apparent. We have been able to deliver good messages through the success of Airbus and our defence business, while in space it has been a turnaround story and now we have to deliver on it."
Source: Flight International
