Airbus Group's (PA:AIR) Q118 trading continued to be adversely affected by engine delays on the A320neo programmes, which constrained deliveries as the manufacturing programme ramps up. Nevertheless, adjusted EBIT actually improved year-on-year. Assuming the corrective actions are successful, Airbus’s sequential progress in cash flow and profitability should become more consistent. Management appears confident that with current A320 and A350 ramp-ups being achieved by mid-2019 and the A400M cash profile improving from next year, strong EPS development and cash growth are in prospect. FY18 guidance is for a 63% rise in adjusted EBIT under IFRS 15 to €5.2bn, with sustainable growth increasingly likely in the future.
Progress in Q1 despite delivery delays
Q1 results were reported after the adoption of IFRS 15. Q118 revenue of €10.1bn (Q117: €11.4bn restated) compared to consensus of €10.2bn. Airbus commercial aircraft revenues fell by almost €1bn to €7.2bn, reflecting lower aircraft deliveries (Q118: 121 vs Q117: 136) as engine delays held back completions on the A320neo family as well as adverse unhedged FX movements. However, the adjusted EBIT loss for the operation reduced to €41m from a loss of €103m in Q117. The decline in sales also reflected disposals by Airbus Helicopters (AH) and Airbus Defence and Space (ADS), which were otherwise relatively stable y-o-y, especially in terms of adjusted EBIT, which totalled €109m. For the group Q118 adjusted EBIT of €14m (Q117: -€19m restated) vs consensus of -€63m. The free cash outflow before M&A and customer financing was €3.8bn (Q117: outflow €1.3bn), reflecting the build-up of undelivered inventory as well as unfavourable timing on trade liabilities.
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