Even In Lean Times, Boeing Defense Is Holding Up
By Michael Mecham
Source: Aerospace Daily & Defense Report
July 26, 2012
Credit: Credit: Boeing
SAN FRANCISCO — Despite the looming threat of sequestration, Boeing Defense Space & Security saw second-quarter revenues increase $8.2 billion and operating margins rise 9.1%, mainly because overseas orders remain strong.
In a second-quarter earnings report, Boeing Chairman and CEO James McNerney said the company overcame the downturn through planning and the fact that it has “a broad range of products.” But he also described a hunkering-down atmosphere.
The defense backlog of $72 billion at the end of the quarter includes 37% — $27 billion — from non-U.S. buyers. That, plus strong a performance by Boeing Commercial Airplanes, has driven the company’s total backlog to $374 billion, including $13 billion in new orders.
The second quarter’s deliveries included the 100th modified Chinook helicopter to the U.S. Army from a facility built two years ago in New Jersey for that program, and completion of a C-17 order for the United Arab Emirates with delivery of the sixth airplane.
Boeing Military Aircraft’s revenues increased 13% to $4.1 billion on a high delivery volume, but lower volume on the Brigade Combat Team Modernization program drove down Network & Space Systems’ revenues by 9% to $1.9 billion.
Still, McNerney was cautious about defense, saying he does not expect any sort of “macro-bounceback” in orders next year. He says the company might make “small tactical deals” in acquisitions to bolster its defense portfolio, but major agreements are not foreseen.
The company’s Global Services and Support business saw revenues increase 11% to $2.2 billion for the quarter; but McNerney expects that as other countries face shortages in defense dollars, they will begin to pull back some of their outsourced services work, which will put pressure on future revenues.