Kevin O'Toole/LONDON
WITH YEAR-END results now in for most of the major US aerospace groups, the effect of mergers and acquisitions are beginning to show through in the industry rankings.
Lockheed Martin, as predicted, has pushed ahead of strike-hit Boeing in the world league table, and is destined to stay out in front following the $9 billion deal to take over the bulk of Loral.
Short of Boeing and McDonnell Douglas (MDC) rekindling their own merger talks - a prospect which some analysts still believe possible - there would be few to compete with a $30 billion Lockheed Martin.
Northrop Grumman also completed a first full year following its 1994 merger and subsequent restructuring. The results are encouraging, with the group posting record $252 million net profits.
The main cloud on the group's horizon is the continuing decline of B-2 deliveries, one of the main drivers behind the merger. B-2 sales, which a few years before accounted for around half of Northrop revenues, edged beneath the $2 billion mark in 1995. Some of the slack is being taken up as production rates begin to build up elsewhere. The group's work on the MDC C-17 transport doubled over the year and revenues from commercial-aircraft contracts are on the rise as production rates pick up at Boeing.
Northrop Grumman chairman Kent Kresa also points to the success of the electronics and systems-integration business which Grum- man brought with it in the merger. Rising volumes on the E-2 Hawkeye and E-8 Joint Surveillance Target Attack Radar System programmes helped push the division's sales above the $2 billion mark.
Expansion into electronics has been underlined by the acquisition of the Westinghouse electronics business, which Kresa says could help Northrop Grumman push annual revenues above $10 billion by the end of the decade.
Raytheon has also been building up its defence-electronics business, with the mid-year acquisition of E-Systems. That helped the group to show record revenues of nearly $12 billion for the year and a backlog which has now passed the $10 billion mark. A strong year from the Beech and Hawker lines also took the aircraft division over $2 billion .
GM Hughes Electronics followed with another set of record sales figures, although much of the growth came from the group's rapidly expanding telecommunications and space business, including its DIRECTV project. The aerospace-defence business saw revenues dip, largely due to lower production rates on missiles programmes, although the impact is being offset by the CAE-Link acquisition and Tomahawk missiles programme.
Hughes chairman Michael Armstrong underlined a strategy for "global expansion" across the business, but notably put the emphasis on telecommunications. He also warns of the need for "continued cost reductions" in core businesses.
Rumours that the Hughes Aircraft business could go to Raytheon have been quashed, at least for the time being, but most analysts still feel that consolidation has some way to run yet.
Despite a weak year for commercial-airliner deliveries, as highlighted by the Boeing results, engine makers appear to be out of the trough. Pratt & Whitney managed to push up operating profits by nearly 40%, finally laying to rest the fall-out of the recession which had done so much damage to its aftermarket business.
P&W is now strengthening its repair and overhaul business with the Nordam acquisition (see panel).
Elsewhere within the United Technologies group, Flight Systems put in a less impressive performance, largely because of lower volumes at Sikorsky, although Hamilton Standard continues to recover, having now turned in six straight profitable quarters.
AlliedSignal's growing aerospace business also made gains from recovery in the high-margin spares and repairs market, and increasing demand for new engines in regional and corporate aircraft. Overall, the aerospace division pushed operating margins close to 11%.
Allied adds that demand for avionics systems has been on the rise, both for airliners and in the general-aviation market. For example, the group doubled sales of panel-mounted global-positioning systems for piston aircraft.
Source: Flight International
