Davy Research |
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Lufthansa
(LHA GY)
H1 results ahead of consensus; reiterates FY 2012 guidance; planned passenger capacity again reduced
02 August 2012
Joshua Goldman
| Closing Price: | 1030c | Rating: | Neutral | 09/09/11 | Previous: | Outperform | 21/03/11 |
FACTS: Lufthansa has released (August 2nd) H1 results, reiterating its FY 2012 guidance of an operating result, excluding restructuring costs (expected to be 100-200m in FY 2012), in the mid-three-digit-million euro range.
ANALYSIS: In Q2, the group earned an operating profit of 361m, which nearly makes up the loss sustained in the first quarter. Thus for H1 the company made an operating result of -20m which was ahead of consensus (-125m) and our estimates (-217m). Revenue of 14.455bn for H1 was broadly in line with consensus (14.455bn). Positive factors included consistent capacity and yield management in passenger and cargo traffic, restructuring successes at Austrian Airlines and good earnings contributions from the service companies. Net loss for the period came to 168m, which represents an improvement of 38m on last year. This includes a result from discontinued operations of 36m, reflecting the closing of the sale of British Midland.
By division, the airlines in the Passenger Airline Group had an operating loss of 179m (previous year: -100m). The division saw load factor improve by 1pp and yield increase by 3.7% in H1. Notably, yields in Europe rose 2.6% and traffic was up by 7.9%. However, a fuel cost increase of 23.7% to 3.3bn offset these operational gains. The operating segment is again adjusting its capacity growth. In its winter flight plan 2012/2013, the Passenger Airline Group plans to cut available seat-kilometres year-on-year by 2.5%. This means that growth will be cut to 0.5% for the full 2012 year (previously expected to grow 1%). The company still expects the Passenger Airline Group to increase its revenue and generate an operating profit in FY 2012.
The Logistics division saw a weak cargo environment (traffic down 8.5%) and capacity was adjusted accordingly (down 7.6%). The division generated an operating result of 47m for H1 which was 64.7%, down on the same period last year. A slight upswing in demand is expected towards the end of the year at the earliest. Lufthansa Cargo is still anticipating an operating profit in the three-digit-million euro range for FY 2012. A repeat of last years very strong result is not to be expected.
The MRO division saw revenue for H1 of 2.0bn which was just under last year's outcome. Operating income was 96m, slightly down on last year's 111m. Considering the cost-cutting and sales measures which have been initiated, Lufthansa Technik still expects to see a moderate increase in revenue for the 2012 financial year. The company also expects its operating profit to come in slightly up.
The IT Services business saw an increase in both operating profit (H1 2012 8m; H1 2011 6m) and revenue (H1 2012 301; H1 2011 289m). The company still expects a positive development in earnings and revenue for FY 2012 for this division.
The catering business saw the H1 operating result increase 9.5% to 23m. Revenue increased 10.5% to 1.2bn. The company expects higher revenue for the division but expects operating results to be in line with last year.
DAVY VIEW: We think that the capacity constraints the company is undertaking are positive. This should help support yields and help the company offset the higher fuel costs. We also view the company's reiteration of guidance as positive. This suggests that it is confident that the measures undertaken in the current challenging environment will allow it to perform.
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