Airbus reports a EBIT €1.6 billion loss in the second quarter

Airbus issued this second quarter financial report:

  • Industrial system adjusted to new production levels, cash containment and business resizing on track
  • H1 financials reflect COVID-19 impact mitigated by adaptation measures 
  • Revenues € 18.9 billion; EBIT Adjusted € -0.9 billion, including € -0.9 billion COVID-19 related charges
  • EBIT (reported) € -1.6 billion; loss per share (reported) € -2.45
  • Free cash flow before M&A and customer financing € -12.4 billion, € -4.4 billion in Q2
  • Strong liquidity underpins business resilience and flexibility

 

Airbus SE reported consolidated financial results for the Half-Year (H1) ended June 30, 2020.

“The impact of the COVID-19 pandemic on our financials is now very visible in the second quarter, with H1 commercial aircraft deliveries halving compared to a year ago,” said Airbus Chief Executive Officer Guillaume Faury. “We have calibrated the business to face the new market environment on an industrial basis and the supply chain is now working in line with the new plan. It is our ambition to not consume cash before M&A and customer financing in H2 2020. We face a difficult situation with uncertainty ahead, but with the decisions we have taken, we believe we are adequately positioned to navigate these challenging times in our industry.”

Net commercial aircraft orders totalled 298 (H1 2019: 88 aircraft), including 8 aircraft in Q2, with the order backlog comprising 7,584 commercial aircraft as of 30 June 2020. Airbus Helicopters booked 75 net orders (H1 2019: 123 units), including 3 H145s, 1 Super Puma and 1 H160 during the second quarter alone. Airbus Defence and Space’s order intake increased to € 5.6 billion.

Consolidated revenues decreased to € 18.9 billion (H1 2019: € 30.9 billion), driven by the difficult market environment impacting the commercial aircraft business with around 50% fewer deliveries year-on-year. This was partly offset by more favourable foreign exchange rates. A total of 196 commercial aircraft were delivered (H1 2019: 389 aircraft), comprising 11 A220s, 157 A320 Family, 5 A330s and 23 A350s. Airbus Helicopters reported stable revenues, reflecting lower deliveries of 104 units (H1 2019: 143 units) partially compensated by higher services. Revenues at Airbus Defence and Space were impacted by lower volume and mix, in particular at Space Systems, as well as delays in some programmes caused by the COVID-19 situation.

Consolidated EBIT Adjusted – an alternative performance measure and key indicator capturing the underlying business margin by excluding material charges or profits caused by movements in provisions related to programmes, restructuring or foreign exchange impacts as well as capital gains/losses from the disposal and acquisition of businesses – totalled € -945 million (H1 2019: € 2,529 million).

Airbus’ EBIT Adjusted of € -1,307 million (H1 2019: € 2,193 million(1)) mainly reflected the reduced commercial aircraft deliveries and lower cost efficiency. Steps have been taken to adapt the cost structure to the new levels of production, the benefits of which are materialising as the plan is executed. Also included in the EBIT Adjusted is € -0.9 billion of COVID-19 related charges.

Commercial aircraft are now being produced at rates in accordance with the new production plan announced in April 2020, in response to the COVID-19 situation. The current market situation has led to a slight adjustment in the A350 rate from 6 to 5 aircraft a month for now. On the A220, the Final Assembly Line (FAL) in Mirabel, Canada, is expected to progressively return to pre-COVID levels at rate 4 while the new FAL in Mobile, US, opened as planned in May. At the end of June, around 145 commercial aircraft could not be delivered due to COVID-19.

Airbus Helicopters’ EBIT Adjusted increased to € 152 million (H1 2019: € 125 million), reflecting a favourable mix, mainly in military, and higher services partially offset by the lower deliveries. The five-bladed H145 and H160 helicopters were recently certified by the European Union Aviation Safety Agency.

EBIT Adjusted at Airbus Defence and Space decreased to € 186 million (H1 2019: € 233 million), reflecting the COVID-19 impact, mainly in Space Systems, partly offset by cost reduction measures. The Division’s restructuring plan was updated to also reflect the impact of the coronavirus pandemic.

Three A400M transport aircraft were delivered in H1 2020. The certification of automatic low-level flight capability and simultaneous paratrooper dispatch were achieved in H1 2020, marking major milestones towards the aircraft’s full development. A400M retrofit activities are progressing in close alignment with customers.

Consolidated self-financed R&D expenses totalled € 1,396 million (H1 2019: € 1,423 million).

Consolidated EBIT (reported) was € -1,559 million (H1 2019: € 2,093 million), including Adjustments totalling a net € -614 million. These Adjustments comprised:

  • € -332 million related to A380 programme cost, of which € -299 million was in Q2;
  • € -165 million related to the dollar pre-delivery payment mismatch and balance sheet  valuation, of which € -31 million was in Q2;
  • € -117 million of other costs, including compliance, of which € -82 million was in Q2.

The consolidated reported loss per share of € -2.45 (H1 2019 earnings per share: € 1.54) includes the financial result of € -429 million (H1 2019: € -215 million). The financial result reflects a net € -212 million related to Dassault Aviation as well as the impairment of a loan to OneWeb, recorded in Q1 2020 for an amount of € -136 million. The consolidated net loss(2) was € -1,919 million (H1 2019 net income: € 1,197 million).

Consolidated free cash flow before M&A and customer financing amounted to € -12,440 million (H1 2019: € -3,981 million) of which € -4.4 billion was in Q2. The corresponding figure for Q1 2020 excluding the penalty payments – related to January’s compliance settlement with the authorities – was also at € -4.4 billion, demonstrating that cash containment measures including the adjustment of incoming supply started to become effective. These measures partially compensated for the reduced cash inflow from the low number of commercial aircraft deliveries in Q2.

Capital expenditure in H1 was stable year-on-year at around € 0.9 billion with Full-Year 2020 capex still expected to be around € 1.9 billion.  Consolidated free cash flowwas € -12,876 million (H1 2019: € -4,116 million). The consolidated net debt position was € -586 million on 30 June 2020 (year-end 2019 net cash position: € 12.5 billion) with a gross cash position of € 17.5 billion (year-end 2019: € 22.7 billion).

The Company’s Full-Year 2020 guidance was withdrawn in March. The impact of COVID-19 on the business continues to be assessed and given the limited visibility, in particular with respect to the delivery situation, no new guidance is issued.

 

Key post-closing events
In the frame of COVID-19, discussions are progressing with social partners. A restructuring provision is expected to be recognised once the necessary conditions are fulfilled. The amount is expected to be between € 1.2 billion and  € 1.6 billion.

The UK Serious Fraud Office (SFO) has requisitioned GPT Special Project Management Ltd (GPT) to appear in court for prosecution on a single corruption-related charge. GPT is a UK company that operated in Saudi Arabia which was acquired by Airbus in 2007 and ceased operations in April 2020. The SFO’s investigation related to contractual arrangements originating prior to GPT’s acquisition and continuing thereafter. A resolution of GPT, whatever its form, will not affect the 31 January 2020 UK Deferred Prosecution Agreement and a value has been provisioned in the Airbus accounts(3).

On 24 July 2020, the Company announced it had agreed with the governments of France and Spain to make amendments to the A350 Repayable Launch Investment (RLI) contracts to end the long-standing World Trade Organisation (WTO) dispute and remove any justification for US tariffs. After 16 years of litigation at the WTO, this final step removes the last contentious point by amending the French and Spanish contracts to what the WTO considers the appropriate interest rate and risk assessment benchmarks(3).

 

Note to editors: Live Webcast of the Analyst Conference Call
At 08:15 CEST on 30 July 2020, you can listen to the H1 2020 Results Analyst Conference Call with Chief Executive Officer Guillaume Faury and Chief Financial Officer Dominik Asam via the Airbus website. The analyst call presentation can also be found on the company website. A recording will be made available in due course. For a reconciliation of Airbus’ KPIs to “reported IFRS” please refer to the analyst presentation.

 

Airbus Consolidated – Half-Year (H1) Results 2020

(Amounts in Euro)

Consolidated Airbus H1 2020 H1 2019 Change
Revenues, in millions

thereof defence, in millions

18,948

4,092

30,866

4,085

-39%

0%

EBIT Adjusted, in millions -945 2,529
EBIT (reported), in millions -1,559 2,093
Research & Development expenses, in millions 1,396 1,423 -2%
Net Income/Loss(2), in millions -1,919 1,197
Earnings/Loss Per Share  -2.45 1.54
Free Cash Flow (FCF), in millions -12,876 -4,116
Free Cash Flow before M&A, in millions -12,373 -3,998
Free Cash Flow before M&A and Customer Financing, in millions -12,440 -3,981
Consolidated Airbus 30 June 2020 31 Dec 2019 Change
Net Cash/Debt position, in millions -586 12,534
Employees 135,154 134,931 0%
By Business Segment Revenues EBIT (reported)
(Amounts in millions of Euro) H1 2020 H1 2019 (1) Change H1 2020 H1 2019 (1) Change
Airbus 12,533 24,043 -48% -1,808 2,006
Airbus Helicopters 2,333 2,371 -2% 152 124 +23%
Airbus Defence and Space 4,551 5,015 -9% 73 -15
Eliminations -469 -563 24 -22
Total 18,948 30,866 -39% -1,559 2,093
By Business Segment EBIT Adjusted
(Amounts in millions of Euro) H1 2020 H1 2019 (1) Change
Airbus -1,307 2,193
Airbus Helicopters 152 125 +22%
Airbus Defence and Space 186 233 -20%
Eliminations 24 -22
Total -945 2,529
By Business Segment Order Intake (net) Order Book
H1 2020 H1 2019 Change 30 June 2020 30 June 2019 Change
Airbus, in units 298 88 +239% 7,584 7,276 +4%
Airbus Helicopters, in units 75 123 -39% 666 697 -4%
Airbus Defence and Space, in millions of Euro 5,588 4,220 +32% N/A N/A N/A
Airbus Consolidated – Second Quarter (Q2) Results 2020

(Amounts in Euro)

Consolidated Airbus Q2 2020 Q2 2019 Change
Revenues, in millions 8,317 18,317 -55%
EBIT Adjusted, in millions -1,226 1,980
EBIT (reported), in millions -1,638 1,912
Net Income/Loss(2), in millions -1,438 1,157
Earnings/Loss Per Share (EPS) -1.84 1.49
By Business Segment Revenues EBIT (reported)
(Amounts in millions of Euro) Q2 2020 Q2 2019 (1) Change Q2 2020 Q2 2019 (1) Change
Airbus 4,964 14,346 -65% -1,865 1,687
Airbus Helicopters 1,131 1,364 -17% 99 115 -14%
Airbus Defence and Space 2,440 2,903 -16% 126 102 +24%
Eliminations -218 -296 2 8 -75%
Total 8,317 18,317 -55% -1,638 1,912
By Business Segment EBIT Adjusted
(Amounts in millions of Euro) Q2 2020 Q2 2019 (1) Change
Airbus -1,498 1,730
Airbus Helicopters 99 110 -10%
Airbus Defence and Space 171 132 +30%
Eliminations 2 8 -75%
Total -1,226 1,980

Q2 2020 revenues decreased by 55%, mainly driven by lower deliveries at Airbus and Airbus Helicopters, and lower revenues at Airbus Defence and Space.

Q2 2020 EBIT Adjusted of € -1,226 million reflected low commercial aircraft deliveries and COVID-19 related charges.

Q2 2020 EBIT (reported) of € -1,638 million included net Adjustments of € -412 million. Net Adjustments in the second quarter of 2019 amounted to € -68 million.

Q2 2020 Net Loss of € -1,438 million mainly reflected EBIT (reported) and the low effective tax rate.

 

 

EBIT (reported) / EBIT Adjusted Reconciliation

The table below reconciles EBIT (reported) with EBIT Adjusted.

Consolidated Airbus (Amounts in millions of Euro) H1 2020
EBIT (reported) -1,559
thereof:
A380 programme cost -332
$ PDP mismatch/balance sheet revaluation -165
Others -117
EBIT Adjusted -945

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