* Upbeat on profitability but short-cycle margins may slip
* Scope for organic growth on three fronts, defence CEO says
* Final deal on Eurofighter in days
By Tim Hepher
MUNICH, June 11 (Reuters) - European aerospace group EADS is confident it can prise internal growth out of its defence business and live for now without acquisitions as it saves cash, the head of its defence and security business said.
The group's second largest unit by revenue after Airbus can again improve its performance in 2009 but sees some pressure on margins further down the line on security products with short production cycles and possible deferrals of security equipment orders, he said.
"Defence and Security always delivered and outperformed our planning in recent years, and we have definitely done well, but we still can do better and we intend to do that," Stefan Zoller, the unit's chief executive, told Reuters.
He was responding in an interview late on Wednesday to a question on whether he stood by a recent prediction that the unit's profit margins would again improve in 2009. They rose to 7.2 percent in 2008 from 6.4 percent the year before.
EADS shares were up 1.1 percent at 11.29 euros at 1312 GMT, erasing part of their earlier gains.
Zoller declined to give a detailed forecast for 2010 but said the economic crisis would not have a significant impact on long-running defence programmes with long development cycles.
"It might be different in some areas where we have very short procurement cycles like rather product-oriented businesses in security, where we may see shortfalls."
Some customers may defer orders for professional mobile communications devices for security and military use.
ACQUISITION-FREE DIET
EADS has placed itself on a broadly acquisition-free diet amid the financial crisis, declaring that "cash is king" as it faces looming threats to its cash pile from penalties for aircraft delays and airline customer demands for financing.
Zoller's unit drew up plans for an unspecified acquisition said to be worth $1 billion or more in the United States last year but major shareholders on the board vetoed the plan.
"When you are not focusing on one approach, you shift your capacity in other directions," Zoller said.
He identified room for internal growth in three main areas:
-- New product and system offerings "including security as well as defence"
-- Development of businesses that tap into relatively robust operating budgets rather than capital spending budgets, which are being eroded by arms cutbacks or shifts in defence spending
-- Expanding the European company's global reach, something that did "not necessarily" need big acquisitions as a recent joint venture with India's Larsen & Toubro had shown.
U.S. HOPES
EADS still wants to expand its defence or security activities in the United States, but any significant leap forward there would still depend on acquisitions, Zoller said.
"We want to grow in the US. Today we grow based on the facilities and capacity that we have, ... coming up with new product-specific offerings," he said.
"A very bold improvement or business development in the country will need acquisitions, that is for sure."
In April last year EADS bought Californian security systems company PlantCML for $350 million.
Zoller said partners in the Eurofighter combat jet project -- Germany, Britain, Italy and Spain -- expected to sign a final deal for the next tranche of production "in the next few days".
The deal, provisionally agreed after Britain lifted cost objections a month ago, involves "significant" cuts in long-term life-cycle costs to be delivered by industry, he said.
Regarding Airbus's A400M military plane, French President Nicolas Sarkozy said on Thursday that countries involved in the much-delayed project needed a further six months to discuss how to proceed.
Asked whether French planemaker Dassault's arrival as a key shareholder had changed EADS attitudes towards French electronics maker Thales, Zoller said that as far his division was concerned, "Thales used to be and will be always a straightforward competitor".
He declined to comment on whether EADS could sell a 46 percent stake in warplane maker Dassault inherited from the French state company that helped to found EADS in 2000. An approach by EADS to try to make an offer for Thales was rebuffed by the French government last year and EADS CEO Louis Gallois has resigned from the Dassault board.
(editing by John Stonestreet)