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Weapons maker BAE Systems today dismissed fears it would suffer as the US slashes defence spending, even as it swung into the red for the first six months of the year.
BAE made a first-half loss of £70 million compared with a £599 million profit last time as it was forced to write down the value of its US business Armor Holdings.
The company wiped £256 million off its value, warning that the outlook for the business was weak.
Meanwhile, its shares dropped 14¾p to 313½p on news that its pension shortfall has ballooned by £1 billion to £3.1 billion.
But chief executive Ian King shrugged off concerns over falling US defence budgets: “We have planned for the level of supplementals [extra spending for war] to reduce, and we have grown our US business in other areas to compensate, such as cyberwarfare and electronics.”
The US accounts for over half of BAE's sales.
King was also bullish about the UK, which will hold a review of defence spending next year: “We have long-term commitments and are very clear about the benefits for the Government about doing business with us.”
Sales rose 28% to £9.94 billion despite falling demand for land vehicles. King is confident that the decline can be offset by strong growth in its combat aircraft division.
The countries behind the Eurofighter Typhoon have this year agreed to sign a contract for the next wave of aircraft, which will add £2 billion to BAE's order book.
The interim dividend has been upped by 10% to 6.4p.
