ii view: Airbus forecasts flat deliveries for 2021

Profits have dived and no dividend declared but are the plane maker’s forecasts a sign of confidence?

Full-year results to 31 December 2020

• Revenue down 29% to €49.9 billion (£43.2 billion)
• Adjusted profit down 75% to €1.7 billion
• Net cash held down 66% to €4.3 billion
• No dividend payment

2021 Guidance:

• Expects same number of commercial aircraft deliveries as in 2020
• Forecasting adjusted profit of €2 billion

Chief executive Guillaume Faury said:

“The 2020 results demonstrate the resilience of Airbus in the most challenging crisis to hit the aerospace industry. I want to thank our teams for their great achievements in 2020 and acknowledge the strong support of our Helicopters and Defence and Space businesses. Many uncertainties remain for our industry in 2021 as the pandemic continues to impact lives, economies and societies. We have issued guidance to provide some visibility in a volatile environment. Over the longer term, our ambition is to lead the development of a sustainable global aerospace industry.”

ii round-up:

Maker of commercial and military aircraft Airbus (EURONEXT:AIR) reported a 75% fall in adjusted profit to €1.7 billion as commercial plane deliveries dropped by a third and its airline customer’s fleets remained largely grounded under the pandemic.

Management projections for a similar 566 commercial aircraft deliveries in 2021 as made in 2020 also underwhelmed investors. Although did suggest increased confidence given the return to offering forward guidance. 

Airbus shares are down around 30% over the last year. Better than arch US rival Boeing's (NYSE:BA) fall of nearly 40%. Although not as severe as the 50% plus fall suffered by engine maker Rolls-Royce (LSE:RR). Shares for airline Air France-KLM (EURONEXT:AF) have also halved over the past year, while shares for British Airways owner IAG (LSE:IAG) are down by more than 60%. 

Airbus previously overtook Boeing as the world’s largest aircraft manufacturer. Aided by increased demand for its A320 family of planes and following the grounding of Boeing’s 737 MAX aircraft in the wake of two accidents. Regulators have now largely cleared the 737 to resume flying. 

The value of Airbus’s order book dropped to €373 billion at the year end, down from €471 billion at the end of 2019. Revenues over the pandemic hit year retreated by 29% to €49.9 billion, with no dividend being declared. 

However, the performance of its defence and space business proved more robust. Revenues fell by just 4%, while order intake by value increased by 39% year-over-year to €11.9 billion.

On an unadjusted basis, and including the costs of restructuring, Airbus made another loss of €1.13 billion. It is currently in the middle of cutting 15,000 jobs. Last year it reported an unadjusted loss of €1.36 billion given the settlement of corrupt bribery charges with British, French and US prosecutors. 

ii view:

Headquartered in Toulouse, France, Airbus operates across the three divisions of commercial aircraft, Space and Defence and Helicopters. It is located in over 150 locations globally and has around 12,000 direct suppliers. Battling arch-rival Boeing to win sales, it employs a workforce of over 130,000 and has achieved a more than six-fold order book increase since 2000. 

For investors, the volatile nature of the airline industry it manufactures for leaves Airbus cyclical in nature.  The pandemic and the worst crisis in the air industry’s history now clearly demonstrates this. Government spending on military craft also has potential to inject volatility. That said, the rollout of vaccines does now offer hope. Revenues are currently expected by analysts to increase over 2021 and 2021, while the biggest restructuring in Airbus’s history is currently underway. For now, while the shares remain high risk, reasons for longer-term optimism do look to be growing. 

Positives: 

• Adjusted profit for 2021 is forecast to increase
• Military aircraft wins boosted its order intake

Negatives:

• Covid-19 clouded outlook
• Net cash held fell by 66%

The average rating of stock market analysts:

Buy