Defense firm BAE reports 20% rise in profits |
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Thu, 08 Sep 2005 00:35
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LONDON: Europe’s largest defense contractor BAE Systems today reported half year operating profits up by 20 percent and net profits up by almost five times. Consequently its share prices rose 2 percent at the London Stock Exchange, peaking at 339 a share - a 52-week high, after today’s announcement.
The firm’s earnings before interest, tax and amortization (EBITA) for the six months to June 30, stood at £566 million (£471 million for same period last year) exceeding analysts expectations of £507 million. The company said its 20 percent stake in Airbus, improving businesses in the US and increased sales of the Typhoon combat jet were responsible for the rise in profits.
Its stake in plane-maker Airbus alone contributed with a 31.6 percent rise (to £104 million) in operated earnings from commercial aviation. Its UK operations which had been under some pressure have now recovered with revenues rising 13.6% to £6.77 billion. The company had faced cost-related problems related with its Astute submarines and Nimrod aircraft which had affected its relationship with the Ministry of Defense, one of its biggest clients.
The Farnborough- (southern England) based firm’s Land and Armaments division showed an impressive turnaround from a £2 million loss, in last year, to underlying earnings of £8 million.
Its US business received a welcome boost from its £2 billion acquisition of US-based United Defense Industries (maker of the Bradley Fighting Vehicle) which increased BAE’s share of the US defense market. The company hopes to generate business of £4.61 billion from North America.
Its programmes division that makes the Eurofighter Typhoon combat aircraft, reported a profit of £88 million, another turnaround for the firm, from a £7 million loss in same quarter last year.
The only dark cloud on the BAE horizon is its pension deficit which rose from last year’s £2 billion to £2.8 billion.
There have been rumors among investor circles that the firm was looking to dispose of its stake in Airbus in order to increase its investment in the US which has the world’s largest defense budget. In an interview, the firm’s chief executive Mike Turner denied any such plans.
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