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Aérospatiale suffers loss
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September 22, 1999: 4:05 a.m. ET
French defense giant pegs first-half deficit to large restructuring, hedging costs
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LONDON (CNNfn) - Aérospatiale Matra, the French space-and-defense giant that is one-third owned by the Lagardère group, reported a hefty net loss in the first half as the company absorbed hundreds of millions of dollars in one-off costs from an ongoing restructuring and privatization scheme.
Aérospatiale, the world's number-two missile maker, behind Raytheon (RTN) of the United States, posted a first-half loss of 105 million euros ($109.4 million) in the first six months of the year, down from a profit of 285 million euros ($297 million) a year ago.
Markets had already digested the loss - which had been widely flagged in the French press - and the company's stock rose 1 percent in early trading in Paris Wednesday. Lagardère (PMMB) had slumped nearly 6 percent Tuesday ahead of Aérospatiale's results.
The company also confirmed it was part of a consortium planning to bid for a stake in Embrarer, the state-owned Brazilian aerospace group which is the world's second-largest producer of regional passenger jets.
Analysts also took heart in a stronger growth outlook for the second half, amid signs of swelling order books for the company's missiles and helicopters.
"On the exceptional items, we knew that they were coming and we knew that they were going to be large," said Sandy Morris, an analyst with ABN Amro in Paris. "In short, this is a restructuring story, it's all about taking costs out, raising efficiencies, and driving up the margins to the 8 percent target."
Aérospatiale attributed the bulk of the loss to 401 million euros used to offset the costs of exchange rate fluctuations as the company revamped its investment procedures. An additional 46 million euro charge was linked to the company's privatization earlier this year.
The French government is in the process of reducing its 48 percent stake in the group. Aérospatiale Matra itself owns 38 percent of Airbus Industrie, the pan-European aircraft consortium, and 48 percent of Dassault Aviation, a maker of commercial and military jets.
The group was created through the merger of Aérospatiale and media giant Lagardère's Matra defense unit.
Operating income at the group fell 41 percent to 129 million euros, while total orders slipped 3 percent to 6.132 billion euros.
Morris, at ABN Amro, said the group - and especially Airbus - had managed to secure some big orders and seemed to be on track for meeting its margin targets. In recent months, he noted, the missile business has clinched a huge order from the British Royal Navy for surface-to-air missiles.
He also played down the downside from the 401 million-euro hedging costs - well above analysts' expectations for 274 million euros.
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Aerospatiale Matra
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