The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
Airbus SE’s operating profit dropped by over half in the second quarter due to significant charges at its space division, coupled with reduced aircraft deliveries.
Key Takeaways:
Earnings Drop: Adjusted earnings before interest and taxes fell 56% to €814 million (RM4.09 billion) for the three months ending in June. The company incurred a €989 million charge at its space unit in the first half of the year, higher than previously forecasted.
Production Challenges: Airbus faces production constraints, unable to build aircraft fast enough to meet the high demand for fuel-efficient jets. This situation has led the company to decline some prospective customers as its popular models are sold out into the next decade. Rival Boeing Co also faces similar production slowdowns.
Parts Shortage: A shortage of components, including engines and cabin interiors, forced Airbus to cut its annual delivery target to 770 units and delay the monthly production rate increase of A320neo jets by a year. This reduction in deliveries impacts cash flow, prompting a revised operating profit and free cash flow outlook for the year.
Market Conditions: Despite strong travel demand, Airbus’s commercial aviation head, Christian Scherer, mentioned at the Farnborough Airshow that a potential slowdown in demand could ease production pressures. However, no customers have requested delivery deferrals yet. The A321neo model is sold out until 2031, and the A350 is unavailable until 2030.
Financial Outlook: Airbus maintains its expectation of adjusted earnings before interest and tax of €5.5 billion for the year, down from an initial goal of up to €7 billion. Free cash flow before customer financing is projected at about €3.5 billion.
Cost-Cutting Measures: In response to the challenging environment, Airbus has launched a savings plan called Project Lead, which includes reducing internal travel and events and seeking cost-cutting measures within individual departments.
Space Systems Review: Airbus has initiated a comprehensive review of its space systems unit, reassessing project timelines and risks. The company is exploring all strategic options, including restructuring, portfolio review, cooperation, and mergers and acquisitions for the unit.
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