August 02, 2012
Credit: Credit: BAE Systems
BAE Systems said delays in completing a substantial deal with Saudi Arabia and lower spending by European and American military customers dented profit, in a sector facing further government defence cuts.
Europe’s largest defence contractor, which will build Britain’s next generation of nuclear-armed submarines, on Thursday said earnings before interest, taxes and amortisation (EBITA) fell 3 percent in the first six months of the year.
U.S. rivals, such as Northrop Grumman and General Dynamics, also reported lower earnings last month, and flagged uncertainty about an additional $500 billion in U.S. defence spending cuts that could come in January, on top of $487 billion in cuts already made.
“BAE were similar to other large U.S. defence companies,” said RBC analyst Rob Stallard. “I see more of the same in big defence with sales below expectations as the U.S. budget declines.”
BAE, which makes around half of its revenues in the United States, said sales at its U.S. platforms and services unit fell 16 percent in the first half.
The group said it had seen less disruption to the award of U.S. defence contracts this year than in 2011 but that it was making plans to cope with further delays caused by presidential elections in November, which could push back 2013 budgets.
“We have been running through plans with all of our U.S. businesses and will take actions on a programme-by-programme basis when we get more clarity,” chief executive Ian King told reporters.
“It’s not all plain sailing given the challenging environment,” King said.