(BFM Bourse) – The aeronautics and defense group is organizing its first Capital Market Day since 2019 at the end of the week. The opportunity for the company to provide information on its trajectory in terms of production and, potentially, financial results.
It had been a long time since Airbus had organized such a high mass with the financial community. The aeronautics and defense group will hold a Capital Market Day on Thursday and especially Friday, that is to say a day dedicated to investors. According to Stifel, this is a first since June 2019 (at the Paris Air Show) and even since February 2016, excluding presentations made at air shows.
Although Airbus has weathered the pandemic without too much difficulty to the point of looking to the future under much better auspices than its competitor Boeing, the market and analysts are awaiting comments on both demand and supply difficulties, as well as only potential indications on its financial trajectory. Here is a non-exhaustive overview.
>Objectives over several years?
Traditionally, an investor day is an opportunity for a large group to give targets with a more or less long horizon on its major financial aggregates. However, it is far from certain that Airbus provides clearly quantified prospects, even if it cannot be ruled out. The group could talk more about a return to its 2019 profitability levels. During this last year before the pandemic, the group had generated adjusted operating profit (Ebit) – the key measure for the group – of nearly 7 billion euros, which corresponded to a margin of 9.8%. Last year, adjusted Ebit was 4.9 billion, or 9.2% of its revenues.
Deutsche Bank estimates that the group could return in 2023 or 2024 to its 2019 profitability, Airbus benefiting between 2023 and 2025 from the savings made possible by its digital shift as well as from its very profitable offer of services, in particular its Skywise predictive maintenance platform. Jefferies considers for its part that the group would have the means in absolute terms to aim for an Ebit of at least 10 billion euros in the medium term.
>Any indication of the status of the request?
At a time when fears about the economy are penalizing all the major industrial groups, Airbus will not escape questions about the demand for aircraft.
“Given general investor concern over the likely length and depth of a global recession, we believe the market is concerned about the risk of a drop in the order cycle and reduction in production plans.” Stifel. The bank nevertheless believes that the group could give “anecdotal comments showing that demand is still solid”.
Airbus has a considerable advantage with its A320 neo family – the group’s flagship single-aisle aircraft – which perfectly meets the needs of companies wishing to have aircraft capable of performing a wide range of flights, in particular certain long-haul flights, enabled by the A321 LR and XLRs. Especially since environmental constraints and ESG issues – environmental, social and governance, that is to say extra-financial – are pushing airlines to renew their fleet to buy, for example, A320 neo, which are more fuel efficient. by 20%.
“We remain confident that Airbus will weather a downturn as airlines continue to favor new narrow-body aircraft in their operations and a short-term downturn in air traffic is unlikely to materially change their appetite for renewal. of their fleet”, thus judges Jefferies.
>A signal on deliveries and production?
Airbus should also face questions about its production trajectory and, by extension, the state of its supply chain, obviously weakened by the current logistical difficulties. Because of these concerns, the group had been forced at the end of July to shift the horizon of its production target of 65 aircraft per month of the A320 family from summer 2023 to early 2024. This also resulted in a downward revision of its target for total deliveries for 2022 to around 700 aircraft, from 720 previously.
Since then, the latest news hasn’t really been reassuring. Raytheon Technologies – of which Pratt and Whitney is one of two engine suppliers for the A320 neo along with CFM International – said its delivery delays could spill over into 2023.
“We hope Capital Markets Day will provide more insight into the supply chain recovery plan and how Airbus is handling the situation to secure the medium-term ramp-up target of 75 aircraft per year. month,” for the A320 family, writes Jefferies. “Airbus deliveries remain the mainstay of operating profit and free cash flow forecasts, so clarifying the delivery situation is a prerequisite,” Deutsche Bank said. The German bank also believes that the target for aircraft deliveries for 2022, although increasingly difficult to achieve, remains “feasible”.
> Indications on the shareholder return policy?
Investors often press Airbus management on these issues and especially on the possibility of launching potential share buybacks. Jefferies, however, considers “low” the possibility that the group’s management will make an announcement on this specific point. But comments on capital allocation obviously need to be watched.
> Details on the ESG policy?
Deutsche Bank believes that the group could detail its measures in terms of ESG policy, while some other companies in the sector, in particular Thales, have organized days dedicated to these themes. The group’s decarbonization efforts could be exposed. In 2020, Airbus launched three hydrogen-powered aircraft concepts that should lead to the entry into service of a completely carbon-free aircraft by 2035. The horizon “2035 on the scale of aviation is tomorrow, we must go quickly”, declared the executive chairman of the group, Guillaume Faury, during the Airbus Summit, an event organized by the group in September 2021 .
Julien Marion – ©2022 BFM Bourse
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