EADS warns A400M charge up to 1.4 bln euros

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PARIS, Nov 5 (Reuters) Airbus parent EADS warned on Monday of a bigger-than-expected charge of up to 1.4 billion euros ( PARIS, Nov 5 (Reuters) Airbus parent EADS warned on Monday of a bigger-than-expected charge of up to 1.4 billion euros ($2.03 billion) from delay of its A400M military plane, forcing it to shelve its 2007 operating profit forecast.

Delay in EADS's biggest military programme follows costly setbacks in its largest airliner, the A380 superjumbo, which rocked its earnings last year.

EADS shares were down 3.67 percent at 22.05 euros as of 0950 GMT, making the stock the biggest faller on France's benchmark CAC-40 index.

When the A400M's delay was announced last month, most brokerage analysts said they expected a charge of about 1 billion euros.

On Monday, Europe's biggest aerospace firm put the figure at 1.2 billion to 1.4 billion euros.

''This figure does not include new potential issues which could arise from flight testing, engine development and military systems. EADS remains in close contacts with its suppliers on these matters,'' it said.

''It was sort of expected but it's more bad news for them,'' said a Paris-based trader, who declined to be named.

Based on latest prices, EADS shares have fallen by around 16 percent in 2007, underperforming a 2 percent gain in the CAC-40 index.

Agilis Gestion fund manager Arnaud Scarpaci said he would continue to steer clear of the stock.

''We remain well away from the stock. There's a lack of visibility on its prospects and it remains highly exposed to the strength of the euro against the dollar,'' he said.

EARNINGS LOOM EADS is set to report third-quarter earnings on November 8 and said it would provide a trading update at the same time.

This time last year the company reported a 1 billion euro charge stemming from delay of the A380, sending the company to a quarterly loss of 239 million euros before interest, taxes and exceptional items.

The company is still working to restore A380 output to expected levels after encountering costly problems in wiring the planes. It is also busy developing a new model called the A350 XWB.

Investors in the company including current and past executives are also the focus of French and German probes into alleged insider trading, although all sides have denied wrongdoing.

The A400M project is worth around 20 billion euros and will deliver 192 transport planes to seven NATO countries as well as South Africa and Malaysia.

Deliveries had originally been planned for October 2009, and the importance of the project led German Economy Minister Michael Glos to urge EADS managers in October to make sure that the A400M did not suffer further delays.

Military projects such as the A400M are part of EADS plans to broaden its product base to help offset an expected slowdown in an airliner market which is currently at its peak.

However, last month Airbus confirmed it would have to push back deliveries for the A400M by up to a year.

The delay followed a provision of 352 million euros announced in March.

When the delay was announced last month, UBS analyst Colin Crook wrote in a research note that the setback for the A400M would likely mean a provision of 1 billion euros in 2007 while Goldman Sachs analyst Sash Tusa predicted 900 million euros.

EADS leads a consortium called Airbus Military building the A400M, which includes TAI of Turkey and FLABEL of Belgium.

(Additional reporting by Blaise Robinson, Mike Shields) REUTERS SLD HS1613 .03 billion) from delay of its A400M military plane, forcing it to shelve its 2007 operating profit forecast.

Delay in EADS's biggest military programme follows costly setbacks in its largest airliner, the A380 superjumbo, which rocked its earnings last year.

EADS shares were down 3.67 percent at 22.05 euros as of 0950 GMT, making the stock the biggest faller on France's benchmark CAC-40 index.

When the A400M's delay was announced last month, most brokerage analysts said they expected a charge of about 1 billion euros.

On Monday, Europe's biggest aerospace firm put the figure at 1.2 billion to 1.4 billion euros.

''This figure does not include new potential issues which could arise from flight testing, engine development and military systems. EADS remains in close contacts with its suppliers on these matters,'' it said.

''It was sort of expected but it's more bad news for them,'' said a Paris-based trader, who declined to be named.

Based on latest prices, EADS shares have fallen by around 16 percent in 2007, underperforming a 2 percent gain in the CAC-40 index.

Agilis Gestion fund manager Arnaud Scarpaci said he would continue to steer clear of the stock.

''We remain well away from the stock. There's a lack of visibility on its prospects and it remains highly exposed to the strength of the euro against the dollar,'' he said.

EARNINGS LOOM EADS is set to report third-quarter earnings on November 8 and said it would provide a trading update at the same time.

This time last year the company reported a 1 billion euro charge stemming from delay of the A380, sending the company to a quarterly loss of 239 million euros before interest, taxes and exceptional items.

The company is still working to restore A380 output to expected levels after encountering costly problems in wiring the planes. It is also busy developing a new model called the A350 XWB.

Investors in the company including current and past executives are also the focus of French and German probes into alleged insider trading, although all sides have denied wrongdoing.

The A400M project is worth around 20 billion euros and will deliver 192 transport planes to seven NATO countries as well as South Africa and Malaysia.

Deliveries had originally been planned for October 2009, and the importance of the project led German Economy Minister Michael Glos to urge EADS managers in October to make sure that the A400M did not suffer further delays.

Military projects such as the A400M are part of EADS plans to broaden its product base to help offset an expected slowdown in an airliner market which is currently at its peak.

However, last month Airbus confirmed it would have to push back deliveries for the A400M by up to a year.

The delay followed a provision of 352 million euros announced in March.

When the delay was announced last month, UBS analyst Colin Crook wrote in a research note that the setback for the A400M would likely mean a provision of 1 billion euros in 2007 while Goldman Sachs analyst Sash Tusa predicted 900 million euros.

EADS leads a consortium called Airbus Military building the A400M, which includes TAI of Turkey and FLABEL of Belgium.

(Additional reporting by Blaise Robinson, Mike Shields) REUTERS SLD HS1613

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