EADS CEO Tom Enders. Picture: REUTERS
EADS CEO Tom Enders. Picture: REUTERS

TOULOUSE — European Aeronautic, Defence & Space (EADS) predicted record earnings for this year as CEO Tom Enders relies on the civil aviation business and whittles down defence activities to meet profitability goals.

Earnings before interest, tax and one-time items will rise to €3.5bn from €3bn last year, and revenue growth will pick up after this year, Mr Enders said on Wednesday in Berlin, where he presented earnings. EADS rose to a record, gaining as much as 8.2%, the most in almost 12 weeks.

Mr Enders is leaning ever-more on growth from Airbus after years of seeking to even out civil and defence revenue. That ambition led him to pursue a merger with BAE Systems last year, before the German government blocked the deal.

In light of shrinking military budgets, Mr Enders said he is content with the imbalance in the portfolio, and that he is not plotting another attempt to merge with the UK company.

"We will remain a significant player in the defence business. 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 defence."

EADS rose as much as €2.87 to €37.74 in Paris, its biggest gain since December 6. The stock has advanced 27% this year, compared with a gain of less than 1% at Chicago-based Boeing.

Earnings at the Cassidian military unit fell 57% last year, in part on €198m 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% to €3bn, and revenue rose 15% to €56.48bn.

A strategy review will be concluded mid-year, Mr Enders said, after the appointment of a new board at an extraordinary general meeting called for March 27. Denis Ranque, former CE of French defence supplier Thales, has been nominated to become EADS chairman.

Reviving merger talks with BAE is "not on the radar screen," Mr Enders said, adding that he is "quite happy" with defence contributing only about 25% of sales. EADS has set a target of delivering a double-digit return on sales by 2015, and Mr 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.

EADS ended work last year on a self-funded drone programme after spending several hundred million dollars without government backing.

Airbus delivered 588 aircraft last year and plans at least 600 handovers, including 25 A380s, this year as airlines seek more fuel efficient airliners. The aircraft subsidiary contributes two-thirds of EADS’s revenue.

Bloomberg