GRAHAM WARWICK / WASHINGTON DC
Aerospace manufacturers look forward to a bumper year; with the promise of substantial military spending increases
The US defence aerospace industry emerged from 2001 well placed to benefit from US military spending increases, after shaking off the ill-effects of its late-1990s consolidation binge. With US defence spending up $55 billion since 11 September, and a further $48 billion increase due this year, firms are expecting a rapid return to growth.
Lockheed Martin Aeronautics' sales climbed 10% to $5.4 billion as F-22 production and international F-16 work ramped up. Higher growth is expected in 2002-3, asF-16 deliveries rise from 20 this year to 65-70. The firm's Systems Integration sector should benefit from higher defence electronics sales, but Space Systems still struggles with slow commercial satellite and launcher sales.
Chief financial officer Robert Stevens says Lockheed Martin had a good year, generating $2 billion cashflow, reducing debt by $2.4 billion, and increasing backlog by 30% to over $71 billion, including the $19 billion Joint Strike Fighter development deal. Though sales were down at $24 billion, the firm is forecasting 5-7% growth in 2002 and 2003. Continuing operations made a $79 million profit last year, against a $382 million loss in 2000, but losses from discontinued operations pushed net losses to $1 billion-plus, including a $1.3 billion charge to quit the global telecommunications business.
Raytheon's defence electronics arm performed well in 2001, says chief executive Dan Burham, but continuing problems at the commercial aircraft unit helped push the firm to a $703 million net loss, against a $151 million profit in 2000. Though Raytheon's overall revenues were flat at $16.9 billion, defence sales increased 7% to $13.8 billion, and should grow 6% this year. Raytheon Aircraft sales fell 20% in 2001, and are forecast to decrease another 9% this year on lower business and commuter aircraft deliveries. Debt had fallen to $7 billion by year-end from a peak of $10.6 billion in early 1998. Year-end backlog was flat at $25 billion.
Northrop Grumman entered 2002 as the USA's third-largest defence contractor, says chief executive Kent Kresa, after its acquisitions of Litton Industries and Newport News Shipbuilding. Sales jumped almost 80% to $13.6 billion last year, and should rise to almost $18 billion in 2002, the first full revenue year after the new purchases. Kresa predicts revenue of $19.5-20 billion in 2003.
Despite sales growth, net income declined to $427 million from $608 million in 2000, because of lower pension income and higher interest costs. The acquisitions drove backlog up to $21 billion - but debt-to-equity ratio climbed to 41% from 29% a year earlier.
General Dynamics continued to out-perform its rivals, with earnings up 11% to $943 million on sales up 17% to $12.2 billion. Chief executive Nick Chabraja says revenues will grow another 10-15% this year. Aerospace sales grew by just under 8% in 2001, after Gulfstream's acquisition of Galaxy, but are expected to remain flat this year on lower aircraft deliveries.
Source: Flight International
