Cash Drivers and Enterprise Value

Transcription

1 Cash Drivers and Enterprise Value Global Investor Forum 2009, Broughton, 1 st & 2 nd April 2009 Gérard Adsuar Corporate Executive Finance & Treasury, EADS 1 1

2 Safe Harbour Statement Disclaimer This presentation includes forward-looking statements. Words such as anticipates, believes, estimates, expects, intends, plans, projects, may and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements made about strategy, ramp-up and delivery schedules, introduction of new products and services and market expectations, as well as statements regarding future performance and outlook. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include but are not limited to: Changes in general economic, political or market conditions, including the cyclical nature of some of EADS businesses; Significant disruptions in air travel (including as a result of terrorist attacks); Currency exchange rate fluctuations, in particular between the Euro and the U.S. dollar; The successful execution of internal performance plans, including cost reduction and productivity efforts; Product performance risks, as well as programme development and management risks; Customer, supplier and subcontractor performance or contract negotiations, including financing issues; Competition and consolidation in the aerospace and defence industry; Significant collective bargaining labour disputes; The outcome of political and legal processes, including the availability of government financing for certain programmes and the size of defence and space procurement budgets; Research and development costs in connection with new products; Legal, financial and governmental risks related to international transactions; Legal and investigatory proceedings and other economic, political and technological risks and uncertainties. As a result, EADS actual results may differ materially from the plans, goals and expectations set forth in such forwardlooking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see EADS Registration Document dated 24th April Any forward-looking statement contained in this presentation speaks as of the date of this presentation. EADS undertakes no obligation to publicly revise or update any forward-looking statements in light of new information, future events or otherwise. 2 2

3 Content Financial Position Overview Cash Flow Consumption & Risk Mitigators Funding policy Enterprise Value 3 3

4 Building Blocks of EADS Funding Policy FUNDING POLICY TOOLBOX Funding tools Banks & DCM * SIMULATIONS Credit ratios & capital structure OUTFLOWS & RISK MITIGATORS Cash Flow drivers & Management actions FINANCIAL POSITION Cash and debt * Debt Capital Markets 4 4

5 Liquidity as of 31 December bn Credit Facility Maturity 2012 Undrawn Fully committed by 36 banks No financial covenants No Material Adverse Change clause 13.7 bn Total Gross Cash Invested in highly rated securities Readily available within a few days 4.5 bn Financing Liabilities (incl. 1.5 bn proceeds of EMTN) 9.2 bn Net Cash EMTN progamme Long term rating : A1 / BBB+ CDS in line with its rating/sector Record 9.2 bn Net Cash & 3 bn undrawn Credit Facility provide high liquidity cushion against risks 5 5

6 Cash and Debt 36% Cash investment split by asset type 27% Cash investment split by counterparty risk 19% 36% 37% 45% Sovereign Money Market Funds Money Market Securities Bonds and notes Financial Corporate Conservative asset allocation Debt Maturity Profile (in bn ) as of 31 Dec 2008 Gross debt by type as of 31 Dec ,6 1,4 1,2 19% 34% Bn 1,0 0,8 0,6 0,4 * 22% * 0,2 0,0 2% % Non recourse debt Sales financing excl. non recourse EMTN Bonds EMTN Bonds EIB loan Non recourse debt Other Financial liabilities against JV Financial liabilities against JV * to be netted with 0.7 bn financial receivables against JV (MBDA) shown as cash Limited financial liabilities 7% EIB loan Sales financing excl. non recourse Other 6 6

7 Content Financial Position Overview Cash Flow Consumption & Risk Mitigators Funding policy Enterprise Value 7 7

8 Order Book as of 31 December 2008 The Order Book contains FIRM orders only, NO options Airbus Order Book : 3,715 aircraft - Order Book is well spread in terms of time, geographical market and customers - Overbooking policy to optimise cancellations / deferrals Eurocopter Order Book : 1,515 units Defence backlog : 57 bn Airbus Book to Bill 1.6 Airbus Order Book 777 3,715 a/c Net orders 483 Deliveries Dec FY

9 Programmes Programmes delays Protection of future EBIT thanks to the accrual of Loss Making Contract Provisions But cash flow consumption still to come A400M impact still to be determined Provisions consumption (without A400M) 3 100% bn 2 56% 1 20% 24% 0 Closing 2008 < > 2013 Restructuring Provisions Liquidated Damages LMC 9 9

10 Customer Financing (Airbus Deliveries E) Record low level of exposure end of 2008 at $1.5 bn Customer financing mainly a Sales/Production matching solver Hold and sell policy strictly applied to limit net exposure intake Tight control by Airbus management over future financing commitments, exposure intake and sell-downs EADS initiatives to increase funding from ECAs and banks : ECA support could more than double in 2009 vs 2008 Manufacturer support (shared with engine manufacturers) likely to increase (on a case by case basis should the airline have no other choice to finance the aircraft) net cash flow consumption for 2009 estimated up to ~ 1bn ECA (excluding op. lessors) ECA Leasing Leasing (excluding ECA) Sale & Lease Back Manufacturer Support Including engine support Cash & External 47% 2% 14% 6% 13% 18% 20% 2008: 483 Deliveries 10 10

11 Pre Delivery Payment Policy Cancellations / Deferrals PDPs generated 50% by Airbus & 50% by non-airbus businesses in 2008, 2007 A standard procedure for procurement of long term defence / institutional projects For commercial aircraft business, PDP a robust policy which has proven its efficiency through down and up cycles For airlines, mandatory to secure a production slot For Airbus, a way to finance ramp-up of work in progress and secure the sale Set up of strict guidelines for PDP profile. Permanent watch of PDPs payments in order to monitor customer contractual situation and take appropriate measures In case of cancellation or airline default, PDP may in addition cover refitting / marketing costs to facilitate subsequent resale In case of PDP deferral, Airbus has the right to defer delivery of the aircraft. Sales / Production matching is monitored weekly in order to minimise cash consumption. Decision to lower production rates can be taken at any time in case of deterioration

12 Other Mitigating Actions USD exposure Record hedging portfolio : $68 bn (75% FX forwards, 25% FX options) Decision to implement $9 bn of FX options in 2008 to increase flexibility Reduced credit appetite of the banking community for FX hedges M&A Acquisition of Plant CML in 2008 Major M&A investments frozen in December 2008 in order to retain cash Share buyback No share buyback planned EBIT risk mitigators R&D reduction, budgets cuts, production resizing Free Cash Flow risk mitigators Capex reduction (non A350), A350 risk sharing financing, Working Capital Improvement 12 12

13 Content Financial Position Overview Cash Flow Consumption & Risk Mitigators Funding policy Enterprise Value 13 13

14 Simulations on Credit Ratios & Capital Structure Stress simulation on 5 year operating plan Deliveries, major programmes, execution of cost saving programmes, USD development and other items... Simulated Credit and liquidity metrics Regular follow-up of main credit and liquidity metrics necessary to retain a strong investment grade rating if simulated credit metrics show numbers which are below the requested levels EADS may look at different refinancing options. 600% 500% Historical FFO / Net debt ratio (adjusted) 561% Billion 14,0 13,0 12,0 Historical Gross Cash 13.7 bn (2008) 400% 11,0 10,0 300% 9,0 200% 100% 100% 167% 96% 116% Not meaningfull 8,0 7,0 6,0 5,0 0% , FFO/Net debt (adjusted) A threshold Gross cash Gross cash threshold 14 14

15 Funding Toolbox: Diversified Funding Sources 3 bn Syndicated Credit Facility : Fully undrawn Maturing in august 2012 No financial clause, no material adverse clause 3 bn EMTN programme : 1.5 bn outstanding A1 / BBB+ ratings and CDS in line with rating and peers allow access to DCM European Investment Bank : EADS has eligible programmes such as A350 which can be financed by EIB 2 bn Commercial Paper programme : currently undrawn EADS has drawn on its CP programme on a regular basis. A350 XWB financing Member states have expressed their support to the A350 XWB Equity related financing Equity, convertible bonds, hybrids if simulated stressed credit metrics signal a potential need to strengthen the capital structure. Current cash situation suggests that no capital increase is required under the contemplated simulations

16 Funding Policy: Roadmap Protect conservative balance sheet structure Increase focus on profitability and cash generation Base line : Power8, Power8+, Working Capital stretch targeting Stress scenario : prepare for further R&D reduction, budgets cuts, production resizing, capex reduction (non A350 XWB),... A350 XWB financing under discussion with members states Keep open other options Disposal of non-core assets Reduced dividends Maintain strong liquidity position (minimum 5 bn gross cash) Access long-term funding to lengthen the maturity profile of EADS gross debt and protect the minimum level of gross cash over time EMTN programme ready for market opportunities, EIB financing 16 16

17 Content Financial Position Overview Cash Flow Consumption & Risk Mitigators Funding policy Enterprise Value 17 17

18 Enterprise Value Principles EV = total resources that need to be rewarded by results Net Cash Non-operating assets Market Capitalisation Quasi-debt 18 18

19 EV Adjustments Adjustments from EV to market capitalization Description of Adjustments Corresponding EBIT adjustment Net cash Non Operating Assets «Quasi Debt» + Net cash position adjusted from non-recourse debt + Investments (Dassault Aviation & Others) - Pensions (net of deferred tax) - Provisions if they have cash impact and are not recurring - Off balance sheet customer financing - Reduce EBIT by the income from investments - 0.2bn + Add back Pensions Net Interest Cost to EBIT bn Refundable Advances ( 4.9 bn) are not treated as debt by credit agencies If for modelling reasons treated like debt, underlying assumption is full success of the programmes & working capital needs then to be adjusted by the repayment (in bn on Free Cash Flow to adjust from refundable advances reimbursement by EADS) 19 19

20 EADS View on EV Calculation EV adjustments (year-end 2008 in bn) EADS Net cash position 9.2 Non-recourse debt 0.7 Adjusted net cash position 10 Off-Balance Sheet customer financing -0.5 Pensions provisions -4.4 Deferred Tax 0.5 Provisions end 2008 (LMC, Settlements, Power 8 restructuring EX A400M) -2.7 Dassault 46% Stake (based on March 26 price: 330)* 1.5 Other investments 0.3 Total adjustments to EV 4.6 Free float of Dassault very limited, market capitalization not a reliable estimate of the value of the stake but the best available At the current share price, EADS Enterprise Value without considering the A400M risk is theoretically valued at 2.6 bn or at 7.5 bn including the retreatment of the refundable advances amounting to 4.9 bn 20 20