Thales Claims Satellite Profit Advantage over Rival Airbus

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PARIS — Thales Group Chief Executive Jean-Bernard Levy on July 24 said the company’s majority-owned satellite manufacturer, Thales Alenia Space, now sells commercial telecommunications satellites more profitably than competitor Airbus Defence and Space and that Thales’ Earth observation business also books “quite attractive” operating margins.

Reporting on Paris-based Thales’ financial results for the first six months of 2014, Levy sought to reassure investors that the company’s recent telecommunications satellite wins — four so far this year after a dry spell — have not come at the expense of profitability.

In addition to two satellites for KT of Korea, one for PT Telkom of Indonesia and one for Inmarsat of London with Arabsat of Riyadh, Saudi Arabia, Thales has booked an order valued at more than 100 million euros ($136 million) for radar reconnaissance satellite payloads for a European customer.

The company did not name the customer, but industry officials have said Thales is building radar payloads for two satellites for the German Defense Ministry under a contract led by OHB AG of Bremen, Germany. A third satellite for the program, called SARaH, also under the OHB contract, is being built by Airbus.

Thales did not break out sales for the space division, but said that a 2-year-old program to improve the competitiveness of the company’s Spacebus telecommunications satellite product line managed by Thales Alenia Space Chief Executive Jean-Loic Galle is now showing the expected results.

“Two years later, we now see the good news,” Levy said. “From the numbers we know Thales Alenia Space [commercial telecommunications satellites production] has a better profitability than its major European competitor, and its profitability is well in line with the average of Thales Alenia Space.

“You can be assured that we do not try to win market share at the expense of profitability,” Levy said. “If we did so we would not be able to report the very good numbers we are reporting today.”

Thales said its space division’s sales for the first six months of 2014 were down slightly from 2013 in part because work on two satellite constellations — O3b Networks and Iridium Next — are moving into delivery and test phases, respectively.

Thales Alenia Space is prime contractor for 12 O3b Networks Ka-band broadband satellites, of which eight have been launched. The company is building 81 Iridium Next satellites for Iridium Communications of McLean, Virginia, with launches scheduled to start in mid-2015.

Pretax profit was also down for the first half of 2014 because of higher satellite manufacturing charges, Thales said.

Levy said the space business should not be viewed as purely a telecommunications enterprise, and that the company’s Earth observation satellite line “is also quite attractive in terms of overall margins.”

Thales Alenia Space builds optical sensors for French government reconnaissance satellites, and it is also active on export markets both on its own and as a partner with Airbus.

 

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