Growth and profitability boeing airbus

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Growth and Profitability

BOEING

Boeing (million $) | | | | | | |
  | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 |
Sales volume | 50 485 | 52 457 | 54 845 | 61 530 | 66 387 | 60 909 |
Operating result (EBIT) | 2 263 | 2 648 | 3 384 | 3 641 | 6 421 | 4 179 |
Net earnings (excluding minority interests) | 718 | 1 872 | 2 572 | 2 215 | 4 074 | 2 672 |
| | | | | | |
Equity(excluding minority interests) | 8 139 | 11 286 | 11 059 | 4 739 | 9 004 | -1 294 |
Financial liabilities | 14 443 | 12 200 | 10 727 | 9 538 | 8 217 | 7 512 |
Total = Economic assets | 22 582 | 23 486 | 21 786 | 14 277 | 17 221 | 6 218 |
| | | | | | |
cash flow generated by the activity | 2 776 | 3 504 | 7 000 | 7499 | 9584 | -401 |
| | | | | | |
| | | | | | |Growth and margins | | | | | | |
Turnover growth |   | 3,9% | 4,6% | 12,2% | 7,9% | -8,3% |
EBIT growth | | 17,0% | 27,8% | 7,6% | 76,4% | -34,9% |
EBTIT/ turnover | 4,5% | 5,0% | 6,2% | 5,9% | 9,7% | 6,9% |
Net earnings (excluding minority interests) / turnover | 1,4% | 3,6% | 4,7% | 3,6% | 6,1% | 4,4% |
| | | | | | |
| | | | | | |
Profitability | | | | | ||
Asset rotation | 2,2 | 2,2 | 2,5 | 4,3 | 3,9 | 9,8 |
Economic profitability | 10% | 11% | 16% | 26% | 37% | 67% |
Financial profitability | 9% | 17% | 23% | 47% | 45% | -206% |
Debt | | | | | |   |
Leverage, Financial Debt / Equity | 1,8 | 1,1 | 1,0 | 2,0 | 0,9 | -5,8 |
Debt duration, Debts / independence | 5,2 | 3,5 | 1,5 | 1,3 | 0,9 | -18,7 |

NB: underlined ratios are notsignificant because in 2009 Boeing had an 8 bn $ adjustment to reevaluate the cost of its pension scheme.

Growth and Margins

From 2003 to 2007 Boeing increased its sales volumes on a strong pace and steadily. In 2006, the growth reaches more than 12%. The EBIT is much more cyclical but if we focus on the economic margin (EBIT/ turnover) we notice that it has been improving. The ratio camefrom 4.5% in 2003 to 9.7% in 2007 (EBIT of 6421 M€), so it can be inferred that the company increased its productivity overtime. That is to say, it earns more net cash which is probably due to a reduction in production costs. Net earnings confirm this trend as it grew five times during period 2003-2007. Besides, the cash flow generated by the activity reveals a good management as the company freed$2776 in 2003 while $9584 in 2008.
These good results in sales were driven by new programs and full production lines at commercial planes and as well growing international sales. Military derivatives of commercial airplanes are a growing market supported by permanent orders from national and foreign governments. Indeed, US government supports its economy through major military orders andjustifies them by war on terrorism. Likewise, foreign governments definitely need military arsenal for their defense and many call orders to Boeing for Geopolitical reasons. Thus, in 2007 both commercial and military witnessed a 10.7% growth. A good indicator is the highest-ever record of orders occurred in 2007. Total Backlog went from M$ 155,498 M in 2003 to 327,166$.
Still, in 2008 Boeing experiencedwith some internal setbacks and deteriorating environment. Its total sales dropped by 8.3% compared to 2007, to M$ 60 909. Its economic margin decreased sharply losing 3 points of percentage (6.9% in 2008).
How can we account for this sudden breakdown?
Negative environment in the economic crisis period had bad consequences on Boeing activities: fluctuating oil price, unfavorable exchangerates, credit crisis and fall in air traffic. As a matter of facts, Air travel correlates with GDP so that it can be easily understood that the crisis strongly affects the industry.
Besides, this slowdown is mainly due to the recent step in re-engineering Boeing’s organization. This change started in the early 2000’s with sales of production sites, significant lay-offs and the departure of the HQ...
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