February 27, 2013
EADS CEO Tom Enders has given up the once important target of balancing civil and defense revenues.
“Maybe it is not a bad time to have a smaller rather than larger defense business,” he said at the EADS annual press conference in Berlin Feb. 27. The plan to increase defense exposure faltered when the merger with BAE Systems collapsed last year and important potential military contracts such as the U.S. Air Force tanker program were lost.
Cassidian’s restructuring is ongoing and the strategic review will only be completed once the new board of directors is in place. However, Enders hinted that Cassidian plans to have a stronger focus on the parts of its business that actually make money, and pull out of parts of its broad portfolio that are not contributing to the bottom line.
Enders says the failed merger attempt with BAE Systems paved the way for the most significant governance change since the creation of the aerospace group in 2000. “The old shareholder pact is dissolved; the influence of governments is greatly limited,” he said. “The new structure has been designed with one thing in mind: operate EADS as a normal company.”
A new board of directors is to be elected by the end of March at an extraordinary shareholder meeting. With the new governance in place, core shareholder influence is going to be more limited than in the past, but the German government will also become a direct EADS shareholder for the first time and France, Germany and Spain will hold a combined stake of close to 30%.
“Governments will always have significant influence regardless of whether they are shareholders,” Enders conceded. He pointed out that in his view the U.S. government would easily be able to keep Boeing from merging with another company. “We are a good investment for governments, but they will have minimum influence,” he says.
One important lesson EADS has learned from the failed merger is that “there is no European defense,” Enders said. “We are far away from it. That’s a major lesson for us as an industry which needs more consolidation.”
EADS revenues were up 15% in 2012, reaching €56 billion ($73 billion). The operating profit increased by 29% to €2.1 billion and the net profit grew by 19% to €1.2 billion. The improvement was mainly driven by Airbus, which saw revenues increase by 17% and operating profit more than double to €1.2 billion. Eurocopter also saw a 16% increase in revenues and Astrium reached 17%. By contrast, Cassidian’s revenues dropped by 1% and its operating profit dropped by more than half to €142 million.
With fewer Airbus A380 deliveries planned for 2013, EADS sees only moderate revenue growth in 2013, but targets a €3.5 billion operating profit. Management is proposing a dividend of 60 cents per share. That proposal has to be approved by the regular general assembly in May.