Feb. 27 (Bloomberg) -- European Aeronautic, Defence & Space Co. predicted record earnings for this year as Chief Executive Officer Tom Enders relies on the civil aviation business and whittles down defense activities to meet profitability goals.
Earnings before interest, tax and one-time items will rise to 3.5 billion euros ($4.58 billion) from 3 billion in 2012, and revenue growth will pick up after 2013, Enders said today in Berlin, where he presented earnings. EADS rose to a record, gaining as much as 8.2 percent, the most in almost 12 weeks.
Enders is leaning ever-more on growth from Airbus SAS after years of seeking to even out civil and defense revenue. That ambition led him to pursue a merger with BAE Systems Plc last year, before the German government blocked the deal. In light of shrinking military budgets, Enders said he’s content with the imbalance in the portfolio, and that he’s not plotting another attempt to merge with the U.K. company.
“We will remain a significant player in the defense business,” Enders said. “We’ll focus on the profitable areas where we have advantages. We’re in the comfortable position where our revenue base is not that dependent on defense.”
EADS rose as much as 2.87 euros to 37.74 euros in Paris, its biggest gain since Dec. 6. The stock has advanced 27 percent this year, compared with a gain of less than 1 percent at Chicago-based Boeing Co., the largest maker of commercial jets.
Earnings at the Cassidian military unit fell 57 percent last year, in part on 198 million euros in charges to pay for jobs cuts and restructuring. The unit was the only subsidiary to report falling profit and sales both in the fourth quarter and the full year. Total income surged 68 percent to 3 billion euros, and revenue rose 15 percent to 56.48 billion euros.
A strategy review will be concluded mid-year, Enders said, after the appointment of a new board at an extraordinary general meeting called for March 27. Denis Ranque, former chief executive of French defense supplier Thales SA, has been nominated to become EADS chairman.
Reviving merger talks with BAE is “not on the radar screen,” Enders said, adding that he is “quite happy” with defense contributing only about 25 percent of sales.
EADS has set a target of delivering a double-digit return on sales by 2015, and Enders said EADS is “well on our glide path” to meeting the objective. As part of that effort, the company said it is taking a more conservative approach on funding military projects.
“We will not enter a field that is not seen by governments as being a key requirement,” Marwan Lahoud, the head of strategy, said at the press conference. EADS ended work last year on a self-funded drone program after spending several hundred million dollars without government backing.
Airbus delivered 588 planes last year and is targeting at least 600 handovers, including 25 A380s, in 2013 as airlines seek more fuel efficient airliners. The aircraft subsidiary contributes two-thirds of EADS’s revenue.
“Those are excellent figures for 2012, and the guidance for 2013 will clearly reassure investors,” said Yan Derocles, an analyst at Oddo Securities in Paris.
EADS said it will propose a dividend of 60 cents, up from 45 cents in 2012. It maintained its currency target for 1 euro to $1.35 this year. The company will make sure that its proposed buyback program of as much as 15 percent of company stock doesn’t weigh on its ability to fund investments.
The merger breakdown with BAE was followed in December by the largest revamp of EADS’s governance structure since its inception in 2000. That allowed institutional shareholders to exit, reducing government direct control in operational affairs and increasing the number of freely traded shares.
“Going forward, the focus on bottom line growth remains our priority number one as a management team,” Enders said. “And there’s still some way to go to meet our profitability targets.”
Net income in the fourth quarter quarter fell by almost half to 325 million euros from 612 million euros a year earlier, on revenue of 19.22 billion euros. EADS booked charges at the Cassidian division to cut jobs, as well as one-time costs at Eurocopter. Of the 820 million euros in charges booked last year, 522 million euros came from Airbus alone.
Airbus is aiming to perform the first test flight of its wide-body long-range A350 by the middle of this year, ahead of planned entry into service by the end of 2014. Yesterday, the company rolled out the first assembled A350 for ground tests on fuel tanks, on the fuselage and on radio equipment.
Enders said the program is entering its “red hot phase” ahead of first flight planned mid-year. Any further delays would result in additional charges against earnings, he said.
--Editors: Benedikt Kammel, Christopher Jasper