DGAP-Adhoc: EADS continues to deliver strong underlying

European Aeronautic Defence and Space Company / Quarter Results

14.11.2008 

Release of a Adhoc News, transmitted by DGAP - a company of EquityStory AG.
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Ad-hoc release, 14 November 2008

EADS  9 months 2008 results

EADS continues to deliver strong underlying performance while proactively
tackling challenges

  - All five Divisions contributed to 7 percent revenue growth to  29.4
    billion

  - Net Cash stood at a record  9 billion; Free Cash Flow at  2 billion

  - Group EBIT* improved to  2 billion;EBIT* surged in helicopter, defence
    and space businesses

  - Unresolved issues in the A400M programme challenge 2008 EBIT* outlook

  - Increase of 2008 Free Cash Flow outlook to above  2 billion

EADS (stock exchange symbol: EAD) delivered encouraging results for the
first nine months of 2008, but is facing challenges in critical programmes.
The Group continued to show robust underlying performance and benefited
from strong market demand. EADS recorded a remarkable order intake across
its product portfolio, receiving 737 new aircraft orders at Airbus as well
as orders for 605 new helicopters at Eurocopter. Capitalising on continued
restructuring efforts in previous years, Astrium displayed both strong top
and bottom line growth. The Defence & Security Division achieved an EBIT*
growth of 74 percent. The Group is carefully monitoring the development in
the financial markets and has started preparing itself to limit negative
impact through a variety of measures.

'EADS faces the impacts of the financial crisis in a position of strength.
Our large and well diversified order book covers deliveries for several
years.
A strong Net Cash position ensures stability while giving us flexibility to
adapt to a changing economic environment,' said EADS CEO Louis Gallois.
'The pressure on the A400M programme remains and we are conducting
ambitious efforts to tackle both the industrial and commercial challenges
in discussion with our customers and suppliers. EADS is more determined
than ever to get this complex programme under control.'

In the A400M programme, the unavailability of a committed and reliable
schedule for the propulsion system, which compounds unresolved issues with
certain equipment supplies as well as equipment and systems integration,
will lead to further delays. Due to the unavailability of a reliable
schedule update in the A400M programme EADS must shift temporarily to the
early stage contract accounting methodology and suspend the milestone
accounting for this programme.** EADS has started to discuss with its main
customers to define next steps. Once a schedule update is achieved, EADS
will resume the milestone accounting and further update the A400M charge,
for which  341 million have been recorded in the third quarter of 2008 and
have burdened EBIT* accordingly.

Revenues increased by 7 percent to  29.4 billion (9m 2007:  27.6 billion)
reflecting growth from operations across all five Divisions. The increase
includes  803 million resulting from the move to the early stage
accounting methodology in the A400M programme applied in Q3 2008.

EADS EBIT* (pre goodwill and exceptionals) for the first nine months of
2008 improved to  2,018 million compared to  -353 million in the same
period of the previous year, when Airbus EBIT* in particular was burdened
by higher exceptional charges (Power8, A400M, A350). The EBIT* growth
resulted from improvements across all Divisions. At Airbus, strong
operational performance in series programmes, achievement of Power8 cost
savings and lower exceptional charges than in the previous year contributed
positively to the improvement. In the first nine months of 2008
deterioration of maturing hedge rates was nearly compensated by a positive
US dollar spot rate impact of around  265 million resulting from the
revaluation of loss making contracts at closing spot rate.

In line with the Group's EBIT* development, EADS improved its Net Income to
 1,082 million (9m 2007:  -705 million), or earnings per share of  1.34
(earnings per share 9m 2007:  -0.88).

Self-financed R&D expenses decreased slightly to  1,792 million (9m 2007:
 1,903 million), but are expected to grow more strongly in the fourth
quarter mainly in the context of Airbus A350 programme.

Free Cash Flow before customer financing was significantly higher at 
 1,959 million (9m 2007:  168 million) driven by an improvement in
working capital caused by lower additions to inventories and higher advance
payments received. Including a low customer financing contribution of  8
million, Free Cash Flow improved to  1,967 million (9m 2007:   111
million). Despite a cash-out for acquisitions and for option hedges, the
Net Cash position reached a record  9.0 billion (year-end 2007:  7.0
billion). This gives EADS a robust liquidity base for the years to come.

In the first nine months of 2008, EADS order intake reached a remarkable
level of  88.7 billion compared to  82.4 billion in the same period of
the previous year. The order intake was strongly supported by the high
order flow at this years Farnborough air show and the UK tanker order. Up
to the end of September 2008, the Groups order book reached a record level
of  400.7 billion (year-end 2007:  339.5 billion). The growth in order
book benefited from a favourable US dollar spot rate at the end of
September compared to year-end 2007. Orders within the commercial aircraft
business are based on list prices. Strong order intake in the defence
businesses pushed the Groups defence order book to a record level of 
57.0 billion (year-end 2007:  54.5 billion). At the end of September, EADS
had 118,487 employees (year-end 2007: 116,493).

Due to the financial crisis, EADS  especially through the commercial
businesses at Airbus, Eurocopter and Astrium  is currently operating in an
uncertain market environment. The slowdown in economic growth and the
resulting strong decrease in air traffic have overshadowed the recovery of
the US dollar versus the euro and the reduction in oil price since the
summer period. Thanks to its strong and geographically diversified order
book and the record Net Cash position, EADS remains robust against the
backdrop of the global financial crisis. Even if EADS has no short-term
refinancing needs the Groups credit facility of  3 billion is fully
committed and undrawn. So far, the Groups institutional and government
businesses are resilient and growing, benefiting from the highest order
book ever.

With weaker anticipated air traffic and more difficult refinancing the
commercial aircraft market is expected to slow down with risk of deferrals
and even cancellations, but visibility on this is limited. Taking this into
account and despite a record order book covering several years deliveries,
Airbus has suspended the production ramp-up of the A320 Family at a level
of 36 aircraft per month. Aircraft financing sources have tightened up. So
far, there have been limited requests to support customers in closing
funding gaps. With the lowest customer financing exposure of the past 20
years and a record Net Cash position EADS is well able to support customers
if feasible on a restrictive and discretionary basis as in previous
downturns. In any case, Airbus and Eurocopter stay vigilant, ready to adapt
themselves to the evolution of the market.

Group-wide efficiency measures are on track. The Power8 restructuring
programme is progressing well and the divestment strategy is delivering:
The sale of the site in Laupheim (Germany) to Diehl/Thales is completed and
the negotiations with GKN regarding the divestment in Filton (UK) are
concluded, but control has not yet passed. Just recently, EADS and DAHER
agreed on the latter acquiring a 70 percent majority stake in EADS Socata.
Establishing links between DAHER and EADS Socata will lead to the creation
of a major player in the field of aerostructures, business aviation and
services. The agreement is subject to approval by the respective
authorities. The new French and German aerostructures companies  Aerolia
and Premium Aerotec  are progressing. These changes will allow EADS and
Airbus to concentrate on core business, whilst creating strong aircraft
component suppliers.

Power8 Plus has been launched as a Group-wide initiative to deliver a
further annual EBIT* benefit of  1 billion from across the Group in 2011
to 2012. The full amount will comprise a  650 million contribution from
Airbus and  350 million contributed by the Eurocopter, Astrium, Defence &
Security and Military Transport Aircraft Divisions as well as by EADS
Headquarters.

In addition, EADS is currently working on a further integration and cost
savings plan called 'Future EADS' at a minimum level of  200 million in
2011-2012. It aims at further integration, improvement of decision making
process and cost savings through the Headquarters, the Divisions and the
interaction between Headquarters and the Divisions.

 Outlook

The EADS guidance is based on a closing spot rate at year-end 2008 of 
 1 = US$ 1.45.

EADS expects Airbus to capture orders for more than 850 new aircraft in
2008.

Forecasted EADS revenues growth to more than  40 billion in 2008 is
unchanged, with over 470 aircraft deliveries for the full year.

With an EBIT* of  2.0 billion in the first nine months of 2008, EADS
should exceed its full-year EBIT* guidance of  1.8 billion (at  1 = US$
1.45) based on the strong underlying performance. This excludes any
additional impact for the A400M, due to the uncertainties of the programme.

The variation of the closing /US$ spot rate at year-end relative to that
of end of September 2008 could have negative or positive impacts on
earnings linked to the revaluation at the closing US dollar rate of some
Airbus balance sheet items, including loss-making contract provisions.

Before the impact of customer financing, EADS expects 2008 Free Cash Flow
at above  2 billion while bearing in mind that this is the most volatile
item to predict.

* EADS uses EBIT pre goodwill impairment and exceptionals as a key
indicator of its economic performance. The term 'exceptionals' refers to
such items as depreciation expenses of fair value adjustments relating to
the EADS merger, the Airbus Combination and the formation of MBDA, as well
as impairment charges thereon.

** As the outcome of the A400M construction contract cannot be estimated
reliably, EADS can currently not comply with all requirements to account
for the contract under the estimate-at-completion accounting methodology.
Consequently and in accordance with IAS 11 (Construction Contracts), EADS
has suspended the application of estimate at completion methodology
accounting ('milestone accounting') and has then recognised contract costs
incurred to date as an expense directly in the income statement as well as
corresponding revenues as far as such contract costs incurred are expected
to be recoverable under the 'early stage' method of accounting. The
loss-at-completion provision was then updated only to cover additional
losses under the contract which EADS was able to estimate reliably.

Contact:

Pierre Bayle +33 1 42 24 20 63

Edmund Reitter +49 89 607 34287
DGAP 14.11.2008 
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Language:     English
Issuer:       European Aeronautic Defence and Space Company
              Beechavenue 130-132
              1119 PR Schiphol Rijk
              Niederlande
Phone:        00 800 00 02 2002
Fax:          +49 (0)89 607 - 26481
E-mail:       ir@eads.net
Internet:     www.eads.com
ISIN:         NL0000235190
WKN:          938914
Indices:      MDAX
Listed:       Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr
              in Berlin, Hannover, Düsseldorf, Hamburg, München, Stuttgart
End of News                                     DGAP News-Service
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DGAP-Adhoc: EADS continues to deliver strong underlying performance while proactively tackling challenges
