October 02, 2012
Credit: Credit: BAE Systems
Tighter military budgets in the United States and Europe reduced the revenues of top weapons makers by one percent in the first half of the year and are likely to continue to depress sales in the full year, a new study by Deloitte LLC showed.
Defense companies in the top 20 global aerospace and defense (A&D) companies reported a $1.3 billion drop in revenues in the first half, after a 3.3 percent decline in 2011, according to the report published on Tuesday. The top 20 companies account for about 71 percent of total global industry revenues, Deloitte said.
At the same time, record-setting production of commercial aircraft pushed commercial revenues 14.9 percent higher, which help increase overall revenues in the combined aerospace and defense sector by $7.2 billion, or 5.5 percent increase.
“It is clear that we’re probably looking at continued contraction in the defense industry. There’s just not enough work to go around,” Tom Captain, leader of global and U.S. aerospace and defense analysis for Deloitte, told Reuters.
He said the second half of the year would show at least a similar level of decline in defense revenues, although U.S. companies were cutting costs, trying to drum up more foreign orders, and taking other measures to survive the downturn.
Lockheed Martin Corp (LMT.N), Boeing Co (BA.N), Northrop Grumman Corp (NOC.N), and other big weapons makers are due to report third quarter earnings later this month.
Captain said the overall industry posted an 8.8 percent increase in operating earnings and a 3 percent rise in operating margins in the first half of the year, largely due to commercial aircraft deliveries and cost-cutting measures.
But gains in the commercial sector far outpaced those reported in defense, where earnings rose a meager 1.5 percent in the first half, according to the report.