Negative cash flow at EADS as production costs increase

EADS ramped up spending on several key infrastructure projects this year, resulting in negative cash flow of €3.2bn (£2.55bn) over the nine months to September.

The aerospace and defence firm has invested in the production of several capital intensive projects at subsidiaries Airbus and Eurocopter, which led its cash flow to drop from a positive figure of €587m over the same period last year.

It is understood that EADS has blamed a funding row with Germany for contributing to the €3bn-plus cash outflow this year, after the European powerhouse withheld a development loan for the Airbus A350 model.

In its first trading update since calling off plans to merge with London-listed BAE Systems last month, the Franco-German-led company said its key A350 aircraft programme remained challenging, despite resolving a wing production problem.

Meanwhile, charges relating to fixing cracks on the wings of the Airbus A380 model so far this year have amounted to €200m, and the total charge for the full year is expected to hit €260m, EADS said yesterday.

The aerospace company was also hit by a €76m charge for the failure of US aircraft manufacturer Hawker Beechcraft.

Exceptional charges for the nine months of the year also included “some” costs relating to the collapsed BAE merger, although EADS declined to disclose the exact amount.

Meanwhile, the firm said that revenue over the first nine months of this year came in at €37.3bn, up 14 per cent year on year thanks to strong sales at Airbus, while net income rose 114 per cent to €903m.

Despite the charges and German loan row, EADS said it was on track to grow its revenue by more than 10 per cent this year, with earnings expected to be around €2.7bn.

“We will not run out of operational challenges anytime soon, especially at Eurocopter and Airbus. And for the rest of the year, we’ll put strong emphasis on cash generation. Aircraft deliveries are key,” said chief executive Tom Enders yesterday.