Business Essentials for Professionals


Saudi Export Ban Will Not Affect 2020 Growth, Predicts BAE Systems

Saudi Export Ban Will Not Affect 2020 Growth, Predicts BAE Systems
The possible future impact of recent German ban on arms exports to Saudi Arabia could be offset by increased defence spending and Britain’s BAE Systems is in a good position to take advantage of it, the company said while forecasting another year of growth for 2020.
The company’s earnings for the full year of 2019 was more towards the upper end of its forecast which helped to drive the shares of the company in the united Kingdom up by 3.5 per cent.
In 2019, the government of Germany imposed a ban on companies that export arms to Saudi Arabia and BAE Systems, which designs and manufactures Typhoon fighters, combat vehicles and Astute Class nuclear-powered attack submarines, is one of the major companies that is set to be affected by the ban.
The German ban on exports of arms to Saudi Arabia has raised questions about the future of a multi-billion pound deal arms deal for the sale of 48 Eurofighter Typhoon jets of the Middle east country. These jest have been designed and are set to be manufactured by a consortium that is led by BAE and also includes MTU Aero Engines and Airbus.
Shrugging off the impact of the ban, company’s CEO Charles Woodburn said that the company was in a position to take advantage of other available opportunities in 2020.
“A number of European countries are looking to increase their defence spending and move closer to meeting their NATO commitments. The group is well-positioned to benefit,” he told reporters on Thursday.
The company pointed out a number of opportunities in the current year that can help offset the impact of the ban which includes a possible order for its Typhoon jets from Germany, a higher revenue from sale of its products to the European missile maker MBDA, in which it owns a stake, as well as anticipated new orders form a land vehicle business of Sweden.
The company would also be able to do business sin the Middle east despite the ban on exports to Saudi Arabia, Woodburn said.
“Within the Middle East region, there are a number of other customers in addition to Saudi, who I think in future will be looking at additional Typhoons,” he said. Oman, Kuwait and Qatar are existing customers.
The most important combat aircraft in BAE Systems’ portfolio is the Typhoon which is an acronym for the Eurofighter Typhoon.
Nest year, the company anticipates that its earnings per share would grow by a mid-single digit percentage, the company said. In the coming months, a 1 billion pound ($1.29 billion) one-off payment into its pension scheme would be taken by it and the amount would be funded through debts, the company also said.
The action taken by the company to address its pension deficit was encouraging, said Jefferies analyst Sandy Morris. “We figure there is certainly renewed life at BAE,” he said.
A better operational performance last year that was a result of a stringent focus on boosting performance for the combat vehicle business of the company in the United States  and a slightly lower tax rate were instrumental in the company reporting earnings in the the upper end of a forecast for a mid-single digit rise for 2019.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc