ii view: Airbus ups its full-year profit forecast

Cost cuts and a restructuring are playing their part for this major manufacturer. We assess prospects.

Nine-month results to 30 September 2021

• Revenue up 17% to €35.2 billion
• Adjusted profit of €3.37 billion, up from a comparable 2020 loss of €125 million

2021 guidance:

• Expects commercial aircraft deliveries of 600 during 2021
• Forecasting adjusted profit of €4.5 billion

Chief executive Guillaume Faury said: “The nine-month results reflect a strong performance across the company as well as our efforts on cost containment and competitiveness. As the global recovery continues, we are closely monitoring potential risks to our industry.”

ii round-up:

Plane-maker Airbus (EURONEXT:AIR) today reported commercial aircraft deliveries to customers of 424, up from a pandemic-hit 341 this time last year and underpinning an increase in its full-year profit estimate.

An adjusted profit of €3.37 billion for the nine months to the end of September contrasts with a loss of €125 million during the production-hit comparable period last year. Management raised its full-year adjusted profit estimate to €4.5 billion from a half-year forecast of €4 billion. 

Airbus shares rose by more than 1% in European trading having about doubled from pandemic-induced lows in March 2020. Shares for US rival Boeing (NYSE:BA) are up by around 95% over that time, while shares for Airbus customer easyJet (LSE:EZJ) have climbed by around 40%. 

Airbus maintained its expectation for 600 commercial aircraft deliveries over the full year, an outcome which would be an improvement over 2020’s 566 planes. 

Helicopter net orders to date totalled 185, up from last year’s 143. Defence and space order intake for the year-to-date came in at €10.1 billion, up from a comparable €8.2 billion in 2020 and including support and spares contract renewals for the German and Spanish Eurofighter fleets.

Group net cash totalled €6.73 billion as of 30 September, an increase from €4.3 billion as of 31 December 2020. Group staff employed fell 4% from the end of December to 125,888. 

ii view:

Headquartered in Toulouse, France, Airbus operates across the three divisions of commercial aircraft, space and defence and helicopters. It is located in more than 150 locations globally and has around 12,000 direct suppliers. 

For investors, the volatile nature of the airline industry it undertakes manufacturing for means Airbus is cyclical in nature. Potential for supply-chain challenges should not be forgotten, while government spending on military craft also has the potential to inject volatility. 

On the upside, the biggest restructuring in Airbus’ history is clearly removing costs. Pressure for airline customers to reduce their environmental impact via more efficient aircraft is ongoing. And a price to net asset value comfortably below the three-year average suggests the shares are not obviously expensive. For now, and while some caution looks sensible, grounds for longer-term optimism appear to persist. 

Positives: 

• A focus on cost savings
• Group net cash of €6.73 billion as of 30 September

Negatives:

• Pandemic-clouded outlook
• Concerns for aviation’s impact on climate change

The average rating of stock market analysts:

Strong buy