The United Kingdom’s largest defense firm experienced record orders as the Russia–Ukraine war boosted military spending in 2022.
British defense giant BAE Systems said on Feb. 23 that orders for weapons systems soared last year amid an “elevated threat environment” in the wake of Russia’s invasion of Ukraine.
The group is one of the largest builders of naval ships, submarines, and fighter jets in the world. The defense contractor’s biggest customers are the United States, Britain, Saudi Arabia, and Australia.
BAE reported its highest order intake in its history, at $44.6 billion for last year, as its order backlog jumped to $70.8 billion.Demand for submarines, fighter jets, military ships, and combat vehicles led the boost to BAE’s 2022 order backlog.
Orders for Weapons Climb After Ukraine War
NATO countries have been bolstering their defenses since the the Russian invasion of Ukraine, which began last February.Demand for weapons, ammunition, and military equipment have soared, as NATO members, which have been arming Ukraine, are looking to rebuild their stocks after sending much of their inventory to Kiev.
However, the defense-and-aerospace group’s pretax profits fell in 2022, and missed its projections after booking higher costs, after posting a pretax profit of $2.4 billion last year, compared with a $2.54 billion profit in 2021, below most analysts’ estimates of $2.51 billion.
This caused BAE’s share price to edge lower today, falling 3 percent in morning trading.
Meanwhile, the defense contractor unveiled flat operating profits of $2.89 billion in 2022, but it was able to report that earnings on an underlying basis rose 5.5 percent, to $3.01 billion, while sales on its preferred measure rose 4.4 percent, to $28 billion.
BAE’s forecast earnings per share (EPS) are expected to rise 5–7 percent this year, after it posted a 9.5 percent rise in underlying EPS for 2022, after it beat forecasts on strong performances from its maritime and cyber units.
“While it is tragic that it took a war in Europe to raise the awareness of the importance of defense around the globe, BAE Systems is well positioned to help national governments keep their citizens safe and secure in an elevated threat environment,” wrote BAE Systems in a statement.
BAE had lifted its final shareholder dividend payout last year to $18.27 from $17.19 in 2021, after it had raised its outlook in November 2022 on the boom in global military spending.
BAE Sees Record Orders in the Year Ahead
“We’ve delivered another year of strong results across the group,” said Woodburn.Woodburn said that BAE had been increasing production at its existing facilities by adding shifts since the early days of the conflict and has also been expanding facilities to keep up with demand.
BAE is anticipating a further boost in March when an update regarding a deal among the United States, Britain, and Australia is expected to provide the latter with conventionally armed nuclear-powered submarines.
Further details will be provided on how the technology will be transferred to Australia and where the submarines will be built, reported Reuters.
“We have a strong footprint and business across all three nations, so we do hope and expect opportunities to come through the AUKUS program,” Woodburn said, referring to a trilateral security pact between Australia, the United Kingdom, and the United States.
Reuters contributed to this report.
