Airbus cuts profit forecast and guidance, shares plummet

In a significant blow to the European aerospace and defence sector, more than £11 billion was wiped off stocks following an Airbus profit warning. The plane maker's shares plummeted 9.4% after revising its forecasts for the year and announcing a £760 million charge on its space division. This led to a continent-wide index of aerospace and defence stocks experiencing a nearly 4% drop, with analysts describing the profit warning as 'stunning' and the downgrades to delivery guidance as a 'real surprise'. Shares in Rolls-Royce, which had seen a remarkable 200% increase over the past year, also took a hit, dropping as much as 4.9% before recovering most of its losses. London-listed aerospace technology supplier Melrose Industries saw a 2.3% decline in its stock. The Stoxx Europe Total Market Aerospace and Defence Index's market capitalisation fell from £296 billion to £284 billion, a drop of around 4%. Airbus announced it would deliver 770 jets instead of the planned 800 due to supply chain issues affecting engines, aerostructures, and cabin equipment, leading to a cut in free cash flow expectations from £3.4 billion to £2.9 billion. The aerospace giant's profit warning prompted Deutsche Bank to downgrade the stock to 'hold', expressing concern over Airbus' control of the supply chain. Airbus attributed the lower targets to persistent part shortages affecting production of its A320neo jets, leading to a revised delivery forecast and a delay in the production ramp-up of A320neo planes. CEO Guillaume Faury acknowledged the challenges faced, particularly with engine supplies and cabin parts shortages, amid broader industry struggles post-Covid-19. The uncertain outlook for aerostructures maker Spirit Aerosystems also contributed to the revised targets. As a result of the revised financial targets and supply chain challenges, Airbus shares fell by 9% on Tuesday, with adjusted earnings before interest and taxes expected to be around 5.5 billion euros, down from the previous estimate. The company now anticipates delivering approximately 770 commercial aircraft this year, compared to the earlier outlook of 800. The guidance cuts were attributed to supply chain issues in the commercial aircraft business and additional costs in the space systems division, impacting Europe-listed shares in the company by 9.6% by the end of the session.