20 February 2014

BAE Profits Down. Big Deal?

Should it matter that BAE Systems profits are in a slump?

BAE Systems shares tumbled on Thursday after the British defence group warned that earnings would drop this year on cuts to government spending in its main market the United States.

The shares were down 9.0 percent in early London deals, also after BAE said that 2013 net profit had slumped 82 percent owing to an impairment charge on its US business totalling £865 million ( $1.441 billion, 1.052 billion euros).

In a further blow, reports overnight said that Germany had cancelled an order for additional Eurofighter Typhoon jets, which BAE makes in cooperation with aerospace giant Airbus Group and Italian defence group Finmeccanica.

BAE Systems said that its profit after tax tumbled to £168 million ($280 million, 203 million euros) in 2013 compared with £948 million a year earlier.

The group announced a 2.0-percent rise in sales for last year to £18.18 billion, with its underlying performance boosted by the so-called Salam deal with Saudi Arabia on improved pricing of Eurofighter jets.

"Following last year's non-recurring benefit from the Salam price escalation settlement, together with continuing US budget pressures, the group's reported earnings per share is expected to reduce by approximately 5 to 10 percent (this year) compared to 2013," BAE said in a statement.

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