Eurocopter sees growth in Asia, services

 - March 5, 2011, 4:30 AM

Eurocopter released figures for 2010 revenues and bookings early this year, revealing that while turnover had increased, notably because of more deliveries in the lucrative medium-twin segment, orders dropped below a six-year average. The Marignane, France-based manufacturer further said it expects sustained or growing activity in the Asia market and in it service segment.

Total revenues grew by another 6 percent last year to €4.8 billion ($6.6 billion), while deliveries were down one unit--527 versus 528 in 2009. “The crisis has impacted light helicopters but we handed over more medium twins and our service business grew as well,” CEO Lutz Bertling explained at the company’s annual press conference in Paris in late January. Referring to the continuing downturn in the helicopter industry, Bertling asserted the 6-percent growth is “not a bad result in this environment.” Profit would be disclosed later by parent company EADS, he said, but Bertling added that Eurocopter’s margin is in the black and above the EADS average.

Helicopter production accounted for 53 percent of the revenues, while services accounted for 36 percent, he said, with the rest coming from extraneous activities such as Airbus door production. He explained that services include training and logistics as well as maintenance, repair and overhaul (MRO).

The report also revealed that civil and parapublic activity represented 54 percent of the turnover. Bertling thus claimed a 49-percent market share in civil and parapublic helicopters, based on global deliveries.

The trend deliveries was better that that for order, decreased to €4.3 billion–a 25-percent drop from 2009. Paradoxically, the difference in the number of net-ordered helicopters is positive--346 versus 344 in 2009. In fact, activity for 2009 included a high-value contract with Brazil for 50 EC725 Cougar medium twins. In 2010, the Super Puma/Cougar family was the best performer, Bertling said, as “the oil and gas market did very well.” Order cancellations during 2010 ranged from 35 to 50, up from the usual 30 to 35 per year.

In value, services accounted for 42 percent of orders, thus reflecting the increase Bertling is betting on. That segment is to be strengthened this year with the addition of flight simulators in the UK, France, Brazil and several Asian countries. The company also expects to make an external MRO acquisition this year.

In the future, system upgrade services are expected to contribute, too, as new designs such as the X4 (a Dauphin replacement, see related story) will need hardware and software “waves of upgrades” every four to five years, Bertling pointed out.

The geographical allocation of business last year saw a significant reshuffle. Asia was number one and Latin America number two in helicopter sale value, at €811 million (€1.1 billion) and €497 million ($680 million), respectively. Currently, Asia is expected to keep the lead or, at least, to stay a major contributor to revenues. Bertling emphasized that, given the size of the country, the 200-or-so civil helicopters flying in China are a tiny number compared with some 10,000 civil rotorcraft flying in the U.S. So, in an effort to spur helicopter growth in the region, Eurocopter is considering building a final assembly line there.

Europe (including the CIS) and North America are the two regions that so far had accounted for most sales. Yet, combined, they just equaled Asia’s share in 2010. Olivier Lambert, senior v-p for sales and customer relations, told AIN that he is hoping traditional markets for light helicopters will pick up again late this year or early in 2012.

Bertling said he expects unit deliveries to slip this year by 5 to 10 percent. But thanks to increased sales in service sales and of the pricier medium twins, the decrease should not be reflected in value, he said, predicting that the pace of orders will remain steady in units and grow in value.

The ongoing Shape reorganization plan, which “is aimed at adapting the company to the new economic context, while maintaining sustainable growth and leadership in the market,” calls for an annual €200 million ($270 million) savings and company officials estimate they have achieved half of this target in 2010. The objective should be fully met this year, they stressed. They also pledged organizational simplification, notably with quicker decision processes.

According to CFO Dieter John, Eurocopter’s headcount has grown by 2,000 over the last two years but some 700-800 temps had to leave the factories. He anticipates the current 16,000-strong workforce will be stable this year. There will be fewer support (meaning support functions such as accountants etc.) employees but more engineers, he explained.

Two facilities will be overhauled. In the Northern outskirts of Paris, the La Courneuve blade factory will be transferred to a still-to-be-built one in Dugny, by the end of 2013. In Germany, design activities at the Ottobrunn site will be moved to Donauwörth, which already regroups production and flight-test facilities. The latter move is planned for 2012.

Bertling kept insisting Brazil is to become Eurocopter's fourth home country (in addition to France, Germany and Spain). “In the 2020s, we will have a Brazilian design in our product range,” he said, clarifying European engineers will contribute, too. As a first major step, Eurocopter will have EC725 Cougar military transports assembled in Itajubá, Brazil, from 2012.

The manufacturer's research and development budget is planned to increase by another 20 percent this year. This should bring it to about €240 million ($330 million), AIN understands. Finally, Bertling announced that “a new helicopter version” will make its maiden flight this year.