Financial News

  • 22 February 2013, 0:04

BAE Systems' Profit Falls Amid Defence Cuts

BAE Systems has reported a fall in global sales and warned of a "constrained" outlook in both the US and UK - two of its key markets.

The defence, aerospace and security company, which employs around 93,500 across the world, said its underlying profit fell 6% to 1.89bn in 2012.

US defence cuts - as well as reduced military activity in Iraq and Afghanistan - hit BAE's US business, which accounts for 40% of the group's sales.

It said military spending is expected to remain lower "in response to reducing overseas operations and measures to address federal deficits."

Europe's largest defence contractor also warned of tougher trading conditions in Britain.

"Growth opportunities in some segments of the US and UK markets are identified, but the overall outlook in both countries is expected to continue to be constrained," it said.

In 2010, the UK Government said it would slash defence spending by 8% by 2014, and the US already has plans in place to cut $487bn (321bn) from its defence budget over the next decade.

These reductions hit total sales in 2012, which fell 7% to 17.83bn.

Unresolved discussions with Saudi Arabia over the pricing of its key Salam contract - supplying Typhoon aircraft - also hit sales, the company said.

BAE stressed that outside of US and UK markets it was performing well, with orders from other countries up to 11.2bn from 4.8bn the year before.

On Tuesday, the company warned that almost 3,600 jobs were at risk in its US shipyards.

BAE told affected employees that their jobs could be lost if the US Navy carried out its "intent to cancel" a number of ship maintenance contracts as a result of unresolved negotiations between Congress and the White House.

"BAE Systems is working closely with our Navy customers and members of Congress to mitigate the impact of or avoid the proposed cancellations," it said on Tuesday.

"We are hopeful that Washington can soon reach an agreement and prevent these job losses."

The results come after a year in which the company's proposed merger with European plane manufacturer EADS, which would have created the biggest aerospace and defence group in the world, collapsed.

Strong opposition from Germany, among other countries, brought down the deal.

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