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Typhoon in flight.

BAE ‘awaiting Middle East orders for Typhoons'

LONDON, July 30, 2015

BAE Systems, which generates about a fifth of its total sales from Saudi Arabia, needs to sell more Typhoons to Saudi and other Middle East customers to keep production of the jet going beyond 2018, a report said.

Europe's biggest defence contractor is still waiting on securing the new aircraft orders it needs to meet its annual earnings target, BAE Systems explained on Thursday.

In reporting a 3 percent slip in first-half earnings per share, BAE maintained its forecast given in February that for 2015 underlying earnings per share would be marginally higher than the 38 pence per share it made in 2014, depending on whether it secured "anticipated" new aircraft orders, which are most likely to come from Saudi Arabia for the Eurofighter Typhoon.

Saudi agreed to buy 72 Typhoons from Britain in 2007 but there have been no new orders for the jet since Oman's in 2012. The Typhoon is a joint project between BAE Systems with partners Airbus Group and Finmeccanica.

Chief executive Ian King confirmed on a call with reporters that sales campaigns were underway.

"There are a number of active campaigns and a number of potential customers and I think we've been clear that the Middle East is an area where there are requirements," he said on Thursday.

Meeting forecasts is also dependent on a review of options for a shipyard in Australia, where it could take a provision, estimated by UBS analysts to be between 50 to 60 million pounds, if it was to decide to scale down facilities there.

"It's conditional on determining with the Australian government what the future of the shipbuild industry is, it's not necessarily about orders, we need to take a long term view on what they want as capabilities," King said.

Analysts at Morgan Stanley said that the absence of a new order for Typhoon would be of greater concern than any restructuring of BAE's shipbuilding business in Australia.

"Nothing in today's statement changes our view that negotiations could yet yield a positive outcome," they said on a possible new Typhoon order.

Saudi Arabia has grown more aggressive this year in countering Iran across the region and analysts said that the muclear agreement struck between Iran and six world powers to release it from sanctions, could encourage Saudi to buy more jets.

BAE said overall it had performed well in the first six months of 2015, reporting underlying earnings per share of 17.1 pence, slightly behind the 17.7 pence it made in the same period last year but ahead of the consensus market forecast and helped by a favourable exchange rate.

The half-year dividend was increased to 8.4 pence from 8.2 pence last time.

Shares in BAE were up 1 per cent at 474.3 pence at 1113 GMT. – Reuters




Tags: Saudi Arabia | BAE Systems | Typhoon | combat jet |

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