Earnings Call Shows Why Astrium Is Being Merged into Airbus Defence & Space

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PARIS — Europe’s Astrium space hardware and services provider on Nov. 14 reported a slight increase in sales and higher profitability for the nine months ending Sept. 30, a period that nonetheless illustrated why Astrium is being merged by its corporate parent, EADS, with EADS’s defense and security business, EADS Chief Financial Officer Harald Wilhelm said.

Total Astrium revenue for the period was 4.01 billion euros ($5.4 billion), up 2 percent from the first nine months of 2012. Its backlog, at 12.9 billion euros, was down 6.6 percent from a year ago, but its pretax profit margin was 5.1 percent, up from 4.8 percent last year. The company trimmed its research and development spending during the period, from 2.2 percent of revenue to 1.9 percent.

EADS, which in January will change its name and the name of its divisions to adopt the better-known Airbus brand, has set as a goal an average 10 percent pretax profit margin for its businesses by 2015, and has said this will not be possible for Astrium without a merger with EADS’s Cassidian division in January. The combined company will be called Airbus Defence & Space.

In a conference call with investors, Wilhelm said the Astrium Services division has been underperforming of late because of increased competition and a difficult environment for government orders, but that the satellites and space-transportation businesses have been doing well.

Astrium’s space transportation division includes French ballistic missiles as well as the Ariane 5 rocket and space station work. It reported a 4.2 percent increase in revenue for the period, to 1.72 billion euros. Wilhelm said the satellite business, “believe it or not,” whose profit-margin outlook remains far from the 10 percent goal, has also been growing. For the nine months ending Sept. 30, Astrium satellite hardware revenue increased by 8 percent, to 1.32 billion euros.

These two divisions’ increases were partly offset by Astrium Services, whose revenue was down 9 percent, to 962.4 million euros, as a result of increased competition and slackening government orders.

Astrium Services’ product lines include optical and radar Earth observation imagery sales and the provision of X-band communications to allied governments.

Wilhelm said merging Astrium with Cassidian into the new Airbus Defence & Space unit will enable the two entities to share overhead and other costs and bring them closer to the overall company’s profit target.

In the satellite manufacturing business, Wilhelm said, “it is more difficult to bring the top line up and the bottom line as well.” Astrium Satellites alone, he said, “won’t get to the 10 percent level, which is the justification for bundling defense and space under one roof to trim costs and overhead. That will compensate for the headroom we are lacking on the satellite side” in terms of profitability.

 

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