Airbus keeps targets after Saudi writedown takes shine off earnings

PARIS: European planemaker Airbus stuck to full-year financial targets after reporting slightly higher-than-expected core first-quarter profit, overshadowed by weaker cash and charges related to a German ban on defence exports to Saudi Arabia.

The results are the first presented by new Chief Executive Guillaume Faury and finance chief Dominik Asam, who both pointed to strong demand for the A320neo jet while dismissing any expectations of a benefit from the Boeing 737 MAX crisis.

Germany said last month it would extend a ban on exporting arms to Saudi Arabia, straining ties with fellow European arms exporters including France, where Airbus is based.

The export ban has further snagged a long-delayed Saudi border security contract.

“We are handcuffed and cannot complete the Saudi export contract as planned,” Asam told analysts, adding that Airbus would continue talks with Saudi Arabia.

Airbus took a charge of 190 million euros (£164.3 million) related to the contract, with foreign exchange charges bringing the total Saudi-related writedown to 297 million euros.

Quarterly revenues rose 24 percent from a year ago to 12.55 billion euros, while adjusted operating profit jumped to 549 million euros from 14 million last year, driven by higher jetliner deliveries following earlier A320neo delays.

Airbus shares rose 0.4 percent in early trading.

A Reuters poll had anticipated revenues of 12.99 billion euros and an adjusted operating profit of 520 million.

After the Saudi charge and a smaller one for the A380, which is set to end production, core profit fell 9 percent.

Higher deliveries of A320neo jets, which sell at a premium to earlier models, and progress in reducing costs on the larger A350 contributed to the sharp rise in profit. But Airbus still faces snags in producing a longer-range A321 with new cabins.

Faury deflected repeated questions about the grounding of the Boeing 737 MAX in the wake of two fatal crashes but downplayed prospects that it would open a new gap for Airbus.

Output of the A320neo is determined for now by the capacity of a flat-out supply chain, and Airbus has no plans to alter its 2021 output goal of 63 aircraft a month, Faury said.

Airbus, which recently cancelled informal plans to raise output to 70 a month after starting to market jets at that rate, will carry out a review of supplier capacity later this year.

Asked whether Airbus stood to gain from concerns expressed by some airlines about the competing 737 MAX, Faury said the medium-term and long-term picture for the A320 had not changed.

“The A320 is the A320 and the MAX is the MAX,” he said.

Airbus suffered a cash outflow of 4.3 billion euros in the quarter as it built inventories to copy with delays but the company expects to see that reverse course later this year.

It reaffirmed 2019 targets, including positive free cashflow of 4 billion euros and a 15 percent rise in operating profit.