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War in Ukraine boosts profits at BAE Systems

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Bae Systems boss says war in Ukraine is accelerating demand for its gear, but acknowledges it is working its way through supply chain challenges

The boss of Britain’s largest defense company said the war in Ukraine accelerated demand for its equipment, but acknowledged it was navigating its way through supply chain challenges.

Charles Woodburn, CEO of BAE Systems, made the comments as the company reported better-than-expected half-year profits of £1.1 billion, up 8 percent from a year ago.

It also confirmed Cressida Hogg’s appointment as the first female chairman, meaning that the three publicly traded British defense companies – BAE, Rolls-Royce and Babcock – will all be female-led.

BAE shares are up more than 30 percent since Russia invaded Ukraine in February as countries ramped up defense budgets — boosting sales prospects for the maker of fighter jets, combat ships and submarines.

BAE revealed in its latest results that its order book had risen to £52.7 billion. But the company also acknowledged struggles with recruitment and supply chains, especially with “very limited” microelectronic components such as chips.

BAE is sticking to the guideline that profits will rise 4 to 6 percent this year, and Woodburn told the Daily Mail that the conflict in Ukraine has “a long-term effect on boosting defense spending and making defense and security a priority for the government’ ‘.

“It’s less of an effect this year and more of an effect next year, the year after that, the year after that,” Woodburn said.

Kit now entering Ukraine comes from the existing stock of the countries that support it.

BAE benefits because the countries that give their equipment to Ukraine have to replace it. The US, Germany and Australia are also responding to increased threats by increasing their overall budgets.

Boris Johnson has pledged to increase the defense budget to 2.5 percent of GDP, while Tory leader Liz Truss wants to increase it to 3 percent.

Woodburn said: ‘Obviously as the UK’s largest defense company, an increase in UK defense spending will ultimately benefit us, but we’ll just have to wait and see how the race plays out.’

About a quarter of BAE’s revenues come from the UK and nearly half from the US and the rest from other markets including Australia and Saudi Arabia.

Woodburn said the company managed supply chain issues better than others in the industry “but it’s not without its challenges.”

He said: “There are certain areas of the business that we work our way through on a daily basis. But we handle those challenges significantly better than most.’

As the industry seeks to scale output, the ability to recruit, train and retain employees has also been “something we all struggle with,” he added, even for BAE’s high-paying career programs.

Asked if the role of the industry’s profile has been boosted as the West wants to help strengthen Ukraine’s defences, Woodburn said: “I think the current conflict only sharpens the importance of defense and security on the current global stage.” has made.’

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