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Airbus in the red – BASF before a possible dividend cut

The crisis in the aviation industry causes Airbus sales to collapse and earnings to drop sharply. In addition, the job cuts at the Franco-German aircraft manufacturer devour billions. BASF also posted a billion-dollar loss in the past quarter and at the same time warned of a dividend cut

First things first about Airbus and BASF:

  • Airbus with loss due to billions provision
  • BASF confirms its annual targets

In the first nine months of the year, Airbus had a loss before taxes and interest (EBIT) of 2.2 billion euros. In the previous year, the aircraft manufacturer had generated an operational plus of 3.4 billion euros. The high loss is also due to the fact that Airbus has set up provisions of 1.2 billion euros for the downsizing, with which the group is preparing for a longer sales crisis.

Sales from January to September were 30.2 billion euros, more than a third below the previous year’s level. Reason: Many airlines postpone the acceptance of aircraft that have already been ordered or cancel orders. Because of the idle air traffic, they threaten to run out of money.

Airbus had cut its commercial aircraft production by around 40 percent due to the slump in air traffic and the plight of many airlines. From January to September, 341 civil aircraft were delivered, 40 percent fewer than in the same period last year. 135 brand new machines that had not yet been accepted by customers were still on the dump at the end of September.

But there is light at the end of the tunnel. In the third quarter, sales only fell by 27 percent. Without the downsizing costs, Airbus would have achieved an operating profit of EUR 820 million despite the ongoing decline in sales. “After nine months we are seeing progress in adapting our business to the new Corona market environment,” said Airbus boss Guillaume Faury. The talks with the employees are making good progress. He expects it will take longer until aviation will recover from the crisis.

Products on Airbus SE

BASF CEO Martin Brudermüller confirmed the annual targets when he presented the quarterly results, but customers are very cautious. “We still don’t have a clear view beyond the next two months,” said Brudermüller. For the time being, the group is aiming for an operating result before special items of EUR 3 to 3.3 billion for 2020, after EUR 4.6 billion in 2019. Sales will shrink to EUR 57 to 58 (59.3 in the previous year) billion. However, this forecast only applies if there are no renewed severe restrictions on economic activity, such as lockdowns.

Brudermüller also warned of a possible cut in the dividend. Because of the pandemic, the distribution could be “adjusted” if the macroeconomic environment changes, growth opportunities diminish and profitability is impaired.

BASF had already published preliminary quarterly figures. Due to value adjustments and restructuring costs, the after-tax loss due to value adjustments and restructuring costs in the third quarter amounted to 2.1 billion euros, after a profit of 911 million euros in the same period of the previous year. The result before special items was almost 45 percent below the previous year’s figure.

Products on BASF

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Source: HSBC

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