BAE Systems' New CEO Outlines Plan to Battle Tighter Competition--Update
August 02 2017 - 3:42AM
Dow Jones News
By Robert Wall
LONDON--The new chief executive of British weapons maker BAE
Systems PLC (BA.LN) on Wednesday promised to focus more on costs
and technology amid greater competition globally, even as he
managed headwinds in the company's combat jet and cyber security
operations.
BAE Systems, Europe's biggest weapons maker, followed its larger
U.S. rivals such as Lockheed Martin Corp. (LMT) in delivering
forecast-beating earnings. Cost cuts and rising defense spending in
key markets have helped lift arms maker's results.
Its shares were up more than 3% by midmorning Wednesday.
London-based BAE, which makes the U.K.'s aircraft carrier and is
a partner on the F-35 Joint Strike Fighter, the Pentagon's largest
weapons program, posted first-half net profit of 555 million pounds
($733 million) compared with GBP408 million the year prior. Its
more closely watched underlying earnings before interest, taxes and
amortization rose 11% to GBP945 million.
Charles Woodburn, who joined the company last year as chief
operating officer and took the CEO role on July 1, replacing Ian
King, who had been in the job since 2008, said BAE would stick to
the current strategy. "It is very much of evolution not
revolution," he said after the results.
Lockheed Martin and other BAE rivals such as Boeing Co. (BA) and
Raytheon Co. (RTN) also are stepping up their drive to win
lucrative overseas business.
With international competition intensifying, Mr. Woodburn said
the company would step-up efficiency measures. An effort to make
purchasing decisions looking across the group to generate savings
have shown good results, he said, with similar measures being
looked at in other areas.
Mr. Woodburn also signalled that the company would try to
bolster its technical edge over competitors. "We already have a
stong focus on technology but you can expect to see more in this
area as we see this as being an increasing driver of competitive
advantage for us," he told reporters, without providing
details.
Mr. Woodburn takes over at a time defense spending in the U.S.,
one of its main markets, is rising. Overseas demand for weapons
also is rising. The company's land systems business, which makes
armored fighting vehicles, should see growth in the coming years,
he said.
Still, Mr. Woodburn inherits some headaches. BAE Systems has
already had to slow production of the Eurofighter Typhoon combat
jet it makes with Airbus SE (AIR.FR) and Leonardo SpA (LDO.MI) to
stretch production amid a lack of orders. But a continued lack of
deals for new planes threatens a production hiatus.
Mr. Woodburn said he expected more deals to be signed for the
twin-engine fighter, without identifying potential customers. BAE
Systems has been in protracted talks with Saudi Arabia for a
follow-on deal to the 72 Typhoons the Middle East country has
already received, but those discussions so far haven't led to a
deal.
BAE on Wednesday warned that any new orders wouldn't boost
production for at least two years. Assembly of Typhoons at BAE is
currently due to end in 2019 unless more deals are secured.
The company also plans to restructure its cyber security
operations. BAE Systems provides cyber security services for U.S.
intelligence agencies and commercial customers. The
commercially-focused Applied Intelligence unit lost GBP27 million
in the first half, though should be near break-even for the full
year.
BAE chief financial officer Peter Lynas said the restructuring
costs wouldn't be major, allowing the company to maintain full-year
guidance of 5% to 10% growth in underlying earnings per share.
Sales increased 8.9% to GBP9 billion.
-Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
August 02, 2017 04:27 ET (08:27 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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