Chris Jasper/LONDON
Raytheon, the US defence electronics to corporate aircraft >giant, has reported a net profit of $864 million for the year - some 64% up on 1997. The company has predicted a strong performance in 1999 on the back of US defence spending.
The Lexington, Massachussetts-based company generated turnover of $19.53 billion in 1998, compared with $13.67 billion the previous year. Raytheon's profit before the deduction of special items of $277 million was $1.14 billion. Fourth quarter performance was also strong, with net profit of $369 million, up by 51%, sales up 36% and operating profit up 73%.
Raytheon's impressive results in terms of cash generation and operating income were, it says, "primarily attributable to the merger with Hughes Defence in late 1997".
The takeover gave a huge boost to Raytheon's defence and commercial electronics interests, with Raytheon Systems Company - formed after the merger - reporting sales of $3.8 billion for the last quarter of 1998 alone.
Raytheon Aircraft (RAC) had a less satisfactory end to the year, with fourth quarter sales up 22% to $972 million, but operating profit down 9% to $81 million.
The company blames the result partly on the fact that an increased proportion of sales have involved used aircraft, with lower margins. It has, however, increased shipments of product lines including Hawker business jets, King Air twin turboprops and commuter aircraft.
Raytheon's total backlog at 31 December was $23.7 billion (up from $21.3 billion a year ago), of which $14.6 billion was made up of US Government orders.
Washington's commitment to the development of a national missile defence programme is at the heart of Raytheon's upbeat assessment of its prospects in 1999.
"I expect to continue to meet our goals for the coming year," says Raytheon president and chief executive Daniel Burnham. "Recent developments in the USA for increased spending on defence programmes, particularly in areas in which Raytheon is well-positioned to participate - such as national missile defence and other defence electronics programmes - help support these expectations."
Raytheon's confidence is mirrored by that of most financial experts, with Credit Suisse First Boston describing the company as "number one" among major defence electronics stocks.
The company is mid-way through a series of plant closures and job cuts as it rationalises in the wake of the Hughes merger. It has already shed 9,700 workers, with a total of 14,000 due to go by the end of this year.
Raytheon also has a large debt burden as a result of the Hughes deal and its acquisition of Texas Instruments, but has gone some way to reducing this through divestitures, asset sales and increased cash flows. The figure stood at $8.6billion on 31 December.
Raytheon has agreed a deal with Alliant Techsystems which will see the Minneapolis-based company act as a preferred strategic supplier to Raytheon.
Source: Flight International