Reliable Performance and Increasing Growth Hans-Peter Ring Chief Financial Officer EADS. North America Investor Forum New York 7 th October 2003

Transcription

1 Reliable Performance and Increasing Growth Hans-Peter Ring Chief Financial Officer EADS North America Investor Forum New York 7 th October

2 Solid and Resilient Performance Financial Highlights in bn FY 01 FY 02 H1 03 Revenues EBIT* Net cash position EBIT- margin pre R&D FY 01 FY 02 H % 12.8 % 11.5 % 6.0% 7.0% 8.3% New orders Orderbook % 4.8% 4.5% * pre-goodwill amortisation and exceptional R&D in % of revenues EBIT margin 2 2

3 Productivity and Flexibility Cyclicality affects volume Capacity flexibility Cash retention programs EBIT improvement initiatives Portfolio re-balancing Increased focus on defence Reconfigure organization to quickly adapt to emerging customer needs 3 3

4 Growth Momentum Space and other commercial 1.2 years 1.3 years Commercial aviation 5.0 years 5.1 years Defense 3.7 years 6.9 years as of Dec. 02 as of June 03 Orderbook times revenues, except for Airbus (deliveries) 4 4

5 CFO Priorities Financial Flexibility Managing for Efficiency Ensuring Transparency 5 5

6 Financial Flexibility Policy: Optimizing cost of capital and ensuring financial flexibility by using diversified funding alternatives: Cash flow from operations Debt market Refundable governmental loans Governmentally funded defence programmes 6 6

7 Operational Cash Flow - Securing Organic Growth [in m] R&D net of tax** = 1,197 Capex = 1, Cash from Operating Activities* before self-funded R&D and before industrial Capex Cash from Operating Activities* after self-funded R&D and before industrial Capex Cash from Operating Activities* after self-funded R&D and after industrial Capex *) includes change in working capital requirements and launch aid variation **) assumed tax rate of 35% R&D net of tax** = 1, Capex = 2,093 Strong firms are those that invest during the downturn 7 7

8 Debt market Strong Rating Secures Debt Funding Potential 7 February 2003 Senior unsecured: A3 3 Sept 2003 Senior unsecured: A outlook stable outlook negative Leading worldwide market positions held by several of its businesses Strong balance sheet which should remain solid during the current severe downcycle in the commercial aircraft market (which is expected to last through at least 2004) Stable outlook is predicated on the favourable long-term outlook for the commercial aircraft business, and the expected gradual improvement in its defence and space businesses Removed from Credit Watch Maintenance of strong financial measures underpin rating Very strong backlog, increasing market share, gradual growth in defence activities Very conservatively leveraged balance sheet. The management has publicly pledged to maintain a strong balance sheet Liquidity should remain very satisfactory despite an increase in leverage EADS intends to retain Single-A rating 8 8

9 Debt Market Additions to Diversified Range of Debt Instruments Recent Issues Euro Bond 1.00bn (drawn) as part of EMTN program Maturity: bn (drawn) as part of EMTN program Maturity: 2018 Available EIB Loan 1.00bn (committed but undrawn) Maturity: up to 15 years Syndicated 2.85bn (committed but undrawn) Loan Maturity: 0.85 bn up to 1 year revolving Maturity: 2.00 bn up to 5 years Funding Alternatives ECP Program / Billets de Trésorerie, U.S. CP-Program, U.S. Bond market, Private Placements,

10 Refundable Governmental Loans Risk Mitigation A380 risk-sharing example (based on a total of US$10.7 bn) US$ 3.1 bn Risk sharing partners (e.g. suppliers) Cash impact of governmental loans Received Reimbursed 2002/2003 (Airbus only) [in m] US$ 2.5 bn Repayable Government Loans for 33% of R&D cost 52% US$ 5.1 bn Financing by Airbus (EADS 80%, BAe Systems 20%) 48% Jun

11 Governmentally Funded Defense Programs Commercial programs Self-financed Margins according to supply/demand Defence programs Customer financed Domestic customers cover market risk Fixed price EADS is growing its defense portfolio to balance financial risks and opportunities 11 11

12 CFO Priorities Financial Flexibility Managing for Efficiency Ensuring Transparency 12 12

13 Centralization of Treasury Functions Central Cash Pooling In order to leverage the significant cash position of the EADS group and its subsidiaries, all cash is pooled daily and invested centrally Provides an actual view on the cash position of the group, enabling control of cash consumption and cash generation Centralized Funding All debt funding activities are managed centrally on a group level Full control on debt profile and conditions - avoidance of structural subordination 13 13

14 Centralization of Treasury Functions Currency Hedging Roughly US$10 bn net exposure per year, arising from firm contracts Keep flexibility to hedge less than 100% to adapt to the business cycle US$ EADS Hedge Portfolio, as of June (6 mth) vs $ 0,95 0, ,96 0, vs $ 1, ,48 1,47 1, Centralization enables: realistic margin analysis during contract negotation phase protects margin after contract closing short and mid term planning reliability and to smooth short term currency fluctuations 14 14

15 Cost and Cash Discipline Cash and cost-improvement programs delivering further value creation Commercial Aviation Large scale efficiency program (1.5 bn recurring cost savings by 2006 at Airbus) Strict control of customer financing Outstanding gross customer financing exposure (US$bn) (excl. stipulated loss values) ,9 0,88 5,36 5,7 0,87 3,94 3,54 3,2 3,79 4,08 Defense Past restructuring pays off: Turnaround achieved, revenues and profitability growing 0,82 0,73 0,64 0, June % ATR 100% Airbus Space Restructuring to adapt capacity to market conditions 15 15

16 Transparency and Visibility Objectives EADS accounting and reporting standards and processes are based on: Reliability Transparency Realistic approach to guidance 16 16

17 Transparency and Visibility Systems and people are the key to outstanding risk management Strong commitment to shareholder interests Transparency underpins management s ability to define its vision 17 17

18 A Management Committed to Performance 18 18

19 Safe Harbor Statement Certain of the statements contained in this document are not historical facts but rather are statements of future expectations and other forward-looking statements that are based on management s beliefs. These statements reflect the Company s views and assumptions as of the date of the statements and involve known and unknown risk and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. When used in this document, words such as anticipate, believe, estimate, expect, may, intend, plan to and project are intended to identify forward-looking statements. Such forward-looking statements include, without limitation, projections for improvements in process and operations, new business opportunities, revenues and revenues growth, operating margin growth, cash flow, deliveries, launches, compliance with delivery schedules, performance against Company targets, new products, current and future markets for the Company products and other trend projections. This forward looking information is based upon a number of assumptions including without limitation: Assumption regarding demand Current and future markets for the Company s products and services Internal performance including the ability to successfully integrate EADS activities to control costs and maintain quality Customer financing Customer, supplier and subcontractor performance or contract negotiations Favourable outcomes of certain pending sales campaigns Forward looking statements are subject to uncertainty and actual future results and trends may differ materially depending on variety of factors including without limitation: General economic and labour conditions, including in particular economic conditions in Europe and North America, Legal, financial and governmental risk related to international transactions The Cyclical nature of some of the Company s businesses Volatility of the market for certain products and services Product performance risks Collective bargaining labour disputes Factors that result in significant and prolonged disruption to air travel world-wide The outcome of political and legal processes, including uncertainty regarding government funding of certain programs Consolidation among competitors in the aerospace industry The cost of developing, and the commercial success of new products Exchange rate and interest rate spread fluctuations between the Euro and the U.S. dollar and other currencies Legal proceeding and other economic, political and technological risk and uncertainties Additional information regarding these factors is contained in the Company s document de référence dated 2nd April The Company disclaims any intention or obligation to update these forward-looking statements. Consequently the Company is not responsible for any consequencies from using any of the above statements

20 Appendix 20 20

21 Net cash position as of June 2003 Positive net cash position Gross cash position 6.6 bn Reported Financial Debts 5.7 bn Net Cash position 0.9 bn and most of debts non-recourse or collaterised Reported Debt 5,7 bn (Nonrecourse Debt) Debt Excl. non-recourse 4,0 bn (Debt backed by aircraft collateral customer financing related) 0,9 bn Debt w/o collateral 21 21

22 Debt market Wide maturity spread of financial debt Total Gross Debt : 5.69 bn as of June 2003 EADS gross debt by maturity EADS gross debt by type 1,4 1,2 1,0 0,8 0,6 0,4 0,2 0,0 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y total gross debt 1,1 0,6 0,5 2,2 1,2 Loans, liabilities and other debts Bonds Debt backed by deposit Non-recourse debt JV-Partners' share of cash deposited by EADS (BAE, Finmeccanica) 22 22

23 Airbus resists thanks to industrial flexibility Aircraft deliveries % Headcount Flexibility in Manufacturing Flextime Delivery plan before Sept11 Overtime Temporary Current Max. capacity: 380 Current rate ~ 300 a/c 20% ~ 250 ~240 Industrial flexibility ~225 (in 2005) % 8% Limited Short term subcontracting permanent Potentials (early retirement, mobility, stored work time, etc) Manufacturing (blue collar) * 20% industrial flexibility subject to SA/LR mix: ~ 70% SA / ~ 30% LR 23 23