Aerospace and Defence untroubled by financial attacks
14 June 2010
A report on the Aerospace and Defence industries shows how little impact short term financial woes have on this long-term sector.
Deloitte, the business advisory firm, has released a study of the global aerospace and defence (A&D) industry’s financial performance in 2009, finding that despite the recession the sector remains resilient.
The study, which evaluated the financial performance of the 91 global companies with revenues exceeding $500m, revealed that global A&D revenue in 2009 remained essentially flat, with a slight 1.3% increase over 2008 to $635bn. However operating earnings decreased 15.3% to $47.9bn while operating margins fell 16.4% to 7.5%.
Pauline Biddle, UK head of aerospace and defence at Deloitte, commented: “The A&D market has weathered the storm of the financial crisis well, due primarily to the fact that the industry relies on long-term contracts which protect it from short-term economic events. In addition to this, the growing need for global defence, security and humanitarian aid, have helped the industry through recent economic challenges. However, as the sector looks to increase revenues and profitability, it is still faced with significant obstacles such as shrinking defence budgets, exchange rate volatility and financing constraints. Future growth in the A&D industry will vary by global region, with the most significant growth expected to come from the East, with India and the Middle East identified as the key markets. Furthermore, it is likely that certain A&D product sub-sectors such as data protection, biometric and domestic security technologies will outperform others in the short to medium term. These are areas where the UK is strong with a good track record of innovation.”
The study also found that US A&D companies were more profitable and grew faster than their European counterparts. European companies, in particular, have faced challenges in rationalising their property, plant and equipment by closing facilities and integrating acquisitions efficiently. Furthermore, European labour laws have prevented some companies from reducing headcount.
The growing importance of services-focused companies was also highlighted in the report, which revealed that service companies grew faster than the total industry year-on-year in 2009.
Pauline Biddle continued: “Services-focused companies are fast becoming a more dominant part of the A&D value chain, as software and other services are purchased by commercial and military customers. However services companies still lag behind the industry in terms of operating margins, although that gap appears to be narrowing.”
In conclusion Biddle added: “Aerospace and defence is a dynamic industry to be working in at the moment, as companies position themselves for growth and emerging markets such as India and the Middle East become increasingly involved. The sector has survived the financial crisis and all those involved in A&D look forward to seeing how the global market evolves.”
Contact Details and Archive...
Most Viewed Articles...