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Airbus drive for 10% return on sales 'realistic'

For the company formerly known as EADS, 2013 was a landmark year of restructuring but 2014 will be just as challenging to managers determined to prove they can now deliver an equally dramatic surge in financial performance.

Speaking at group headquarters in Toulouse on 26 February to detail full-year results for a 2013 which brought reduction to token levels of French and German state ownership and control, a rebranding as Airbus Group and initiation of a process to control space and defence business costs by creating a single division, chief executive Tom Enders emphasised Airbus’s sustained improvement in profitability.

A drive begun by predecessor Louis Gallois to lift low-single-figure percentage profits has pushed underlying return on sales – earnings before interest, taxes and one-off charges – to 3.5% in 2011, 5% in 2012 and 6% in 2013, Enders’ first full year at the helm.

Now, says Enders, Airbus can reach 7-8% in 2015 – a goal in line with longstanding promises of 10% bar “margin dilution” from the A350 programme, which is proving more expensive than could have been anticipated several years ago.

To Enders, the €913 million ($1.25 billion) in 2013 one-off charges was “too high”. One-offs included included €434 million against the A350 and €292 million against restructuring.

However, he says, restructuring is a “complex” process of negotiation with labour that has months to run, but the result will be dramatic. The 10% return on sales goal is “entirely realistic”, he says, “even for Airbus Defence & Space”.

Meanwhile, Enders promises to focus on running the business: “We’re not planning any new adventures for 2014. The focus will be on execution, execution, execution.”

From the first quarter of 2014, Airbus will report from its new, three-division structure: Airbus Commercial, Airbus Helicopters and Airbus Defence & Space (including Airbus Military and Cassidian). For 2013, group pre-tax profit grew 21% to €1.98 billion on sales up 5% to €59.3 billion. Airbus commercial sales were up 6% to €39.9 billion and EBIT grew 39% to €1.6 billion. Airbus Military’s sales were up 36% to €2.89 billion (EBIT +78% to €166 million); Eurocopter’s up 1% to €6.3 billion (EBIT +28% to €397 million); Astrium’s down 1% to €5.78 billion (EBIT +12% to €347 million); and Cassidian’s up 4% to €5.98 billion (EBIT +238% to €432 million).

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