EADS' Rating Stable, Big Projects Weigh
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The troubled A400M military aircraft project and high spending on Airbus's next civil jet, the A350, are weighing on parent EADS, ratings agency Moody's said, but it reaffirmed its rating.
Moody's has an A1 rating with a stable outlook on the European aerospace and defense group but this is bolstered by the fact that France enjoys its top grade.
EADS is jointly controlled by French and German interests including the French government, which owns 15 percent. The assessment by Moody's combines a baseline rating for the company, equivalent to Baa1, with France's Aaa rating.
"Expectation of support from the French state is reflected in the A1 rating," the agency said on Monday.
"Key debt metrics generally support the (baseline) but the operating margin at the mid single-digit level trails expectations for the Baa category," Robert Jankowitz, senior vice president at Moody's, said in a report.
On the positive side as far as evaluating its credit is concerned, EADS has a cash surplus, has backed off acquisitions in defense and has built up momentum in cutting costs, he said.
"Nonetheless, the (baseline) is under downward pressure by continuing problems from the A400M military transport plane and the long-term demand for the A380 jumbo airplane, as well as the considerable investment as the A350 XWB ramps up over the coming years," he said.
The operating margin will be weighed down by ongoing challenges with these programs, he added.
"Potential cash costs for the delayed A400M military transport airplane and high development spending on the new A350 XWB strain an operating profile already affected negatively by the lengthy and expensive roll-out of the A380 jumbo jet," the report said.
EADS shares dipped into negative territory after the report but later shrugged off the concerns to close up 2.3 percent in line with a stronger market.
An EADS spokesman said the industrial challenges facing EADS were already well known and highlighted the fact that Moody's had not changed its rating on Europe's largest aerospace group.
