Airbus profit rise beats forecasts, but delivery challenges expected

Airbus is facing industrial delays at a a new expanded plant in Germany. (Reuters)
Updated 31 July 2019

Airbus profit rise beats forecasts, but delivery challenges expected

  • Airbus is the manufacturer of the A380, the world’s biggest passenger plane

PARIS: Airbus posted stronger-than-expected core second-quarter earnings, led by the switch to efficient new single-aisle jets, and maintained its profit forecast for the year while warning of delivery challenges in the second half.

Europe’s largest aerospace group said second-quarter adjusted operating profit rose 72 percent to €1.98 billion ($2.2 billion), led by a more-than-twofold rise at the main Airbus commercial planemaking arm. Revenues rose 23 percent to €18.32 billion.

Analysts were on average forecasting adjusted quarterly operating income of €1.774 billion on revenues of €17.824 billion, according to a company-compiled consensus.

Airbus is trying to overcome industrial delays at a newly expanded plant in Hamburg, Germany, which is responsible for enhanced cabins for the in-demand A321neo, the largest version of the planemaker’s best-selling single-aisle family.

Airbus said it was looking at options to increase the share of the A321neo in the wider A320neo family.

“The second half of the year in terms of deliveries and in particular free cash flow continues to be challenging,” Chief Executive Guillaume Faury said in a statement.

Airbus is nonetheless on course to be the world’s largest planemaker in 2019 as US rival Boeing faces a longer-than-expected grounding of its 737 MAX, ordered by worldwide regulators in March in the wake of two fatal accidents.

Boeing last week posted its largest-ever quarterly loss due to the grounding crisis.

Airbus took €75 million in new charges in the second quarter, related to the cost of winding down its A380 superjumbo program after deciding to scrap output due to weak demand.

Air France-KLM on Tuesday announced plans to retire the world’s largest jetliner to concentrate on smaller models like the A350, which Airbus said was on track to break even this year after “good progress” in reducing costs.

Airbus took €90 million in other charges including compliance costs as it pursues a four-year-old investigation into the use of middlemen in aircraft and other sales. The company said in its accounting notes that it was too early to assess liability for potential fines or other lawsuits.

The European company warned formally for the first time of damage to deliveries and finances if the US goes ahead with plans to imposes tariffs on European planes as part of a long-running transatlantic trade dispute over subsidies.

Airbus said it continued to support a negotiated solution.


HP rejects Xerox takeover bid, says open to acquiring Xerox instead

Updated 18 November 2019

HP rejects Xerox takeover bid, says open to acquiring Xerox instead

  • In rejecting Xerox's $33.5 billion cash-and-stock acquisition offer, HP said the offer “significantly” undervalued the personal computer maker
  • Xerox made the offer for HP on Nov. 5 after resolving its dispute with its joint venture partner Fujifilm Holdings Corp.
NEW YORK: HP Inc. said on Sunday it was open to exploring a bid for US printer maker Xerox Corp. after rebuffing a $33.5 billion cash-and-stock acquisition offer from the latter as “significantly” undervaluing the personal computer maker.
Xerox made the offer for HP, a company more than three times its size, on Nov. 5, after it resolved a dispute with its joint venture partner Fujifilm Holdings Corp. that represented billions of dollars in potential liabilities.
Responding to Xerox’s offer on Sunday, HP said in a statement that it would saddle the combined company with “outsized debt” and was not in the best interest of its shareholders.
However, HP left the door open for a deal that would involve it becoming the acquirer of Xerox, stating that it recognized the potential benefits of consolidation.
“With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction,” HP said in its statement.
The move puts pressure on Xerox to open its books to HP. Xerox did not immediately respond on Sunday to a request for comment on whether it will engage with HP in negotiations as the potential acquisition target, rather than the acquirer.
HP on Sunday published Xerox CEO John Visentin’s Nov. 5 offer letter to HP, in which he stated that his company was “prepared to devote all necessary resources to finalize our due diligence on an accelerated basis.”
Activist investor Carl Icahn, who took over Xerox’s board last year together with fellow billionaire businessman Darwin Deason, said in an interview with the Wall Street Journal last week that he was not set on a particular structure for a deal with HP, as long as a combination is achieved. Icahn has also amassed a 4% stake in HP.
Xerox had offered HP shareholders $22 per share that included $17 in cash and 0.137 Xerox shares for each HP share, according to the Nov. 5 letter. The offer would have resulted in HP shareholders owning about 48% of the combined company. HP shares ended trading on Friday at $20.18.
Many analysts have said there is merit in the companies combining to better cope with a stagnating printing market, but some cited challenges to integration, given their different offerings and pricing models.
Xerox scrapped its $6.1 billion deal to merge with Fujifilm last year under pressure from Icahn and Deason.
Xerox announced earlier this month it would sell its 25% stake in the joint venture for $2.3 billion. Fujifilm also agreed to drop a lawsuit against Xerox, which it was pursuing following their failed merger.

Test for new HP CEO
In 2011 as the centerpiece of its unsuccessful pivot to software. Little over a year later, it wrote off $8.8 billion, $5 billion of which it put down to accounting improprieties, misrepresentation and disclosure failures.
More recently, HP has been struggling with its printer business segment recently, with the division’s third-quarter revenue dropping 5% on-year. It has announced a cost-saving program worth more than $1 billion that could result in its shedding about 16% of its workforce, or about 9,000 employees, over the next few years.
Xerox’s stock has rallied under Visentin, who took over last year as CEO. However, HP said on Sunday that a decline in Xerox’s revenue since June 2018 from $10.2 billion to $9.2 “raises significant questions” regarding the trajectory of Xerox’s business and future prospects.