Graham Warwick/WASHINGTON DC Chris Jasper/LONDON
Seemingly unburdened by the post-merger woes afflicting some US aerospace and defence primes, General Dynamics (GD) and Northrop Grumman have reported strong profits for last year. Lockheed Martin and Raytheon posted mixed results, but Textron saw improved profits from its aircraft operations.
Boeing, which earlier reported slightly depressed profits on lower sales, is meanwhile reported by Business Week to be considering closure of its 737/757 lines in Renton, Seattle, and their relocation to the plant in Everett. Boeing says "looking at our facilities is key to our competitiveness."
Lockheed reported a net loss of $519 million for the year, after unusual items, while Raytheon saw income from continuing operations slip to $498 million. After losses on discontinued operations, Raytheon's net income dropped to $141 million. Only General Dynamics saw sales increase significantly, to $10.4 billion, mainly via acquisitions. Net earnings were $901 million.
Revenues at Lockheed and Raytheon slipped slightly to $25.3 billion and $16.9 billion respectively, largely because of divestitures over the year, while Northrop sales were flat at $7.6 billion, although it managed a 30% increase in net profit.
The good news for the industry was in cashflow and debt reduction. Lockheed generated a record $1.8 billion in free cash flow and expects to achieve the same over the next two years combined. The company reduced its merger-bloated debt-to-capital ratio to 54%, from 64% in 1999. Northrop Grumman and GD generated almost $1 billion apiece in cash from operations, while Raytheon managed $527 million and saw its debt-to-capital ratio nudge up to 47.9%. GD's figure is less than 12%.
All four companies ended 2000 with higher backlogs, and with US defence spending due to rise 2-3% this year, all expect higher earnings.
Despite its net loss, Lockheed says it achieved its financial goals last year, improving cashflow, reducing debt and obtaining fair value for its divestitures. Its Space Systems and Aeronautics segments continue to face challenges, however. Raytheon says it also met targets, highlighting the strong cashflow generated by its Electr-onics Systems defence business.
Raytheon Aircraft, which is rumoured to be up for sale, increased deliveries, but fell short of its cashflow target.
In contrast, the star performer at GD was Gulfstream Aerospace, which saw earnings grow 23% and operating margins increase to 20%. Northrop believes divestitures and cashflow leave it well-positioned for its planned merger with Litton, restructured to allow Litton shareholders to take Northrop stock instead of cash.
Source: Flight International
