Deloitte: Defense Industry Continues to Shrink

By Rob Starr, Content Manager, Big4.com

Defense contractors in the top global aerospace and defense (A&D) companies experienced a 1.0 percent decrease in global revenues in 1H (first half) 2012, on top of the 3.3 percent decline in revenues in 2011. This from a new financial report from Deloitte, Mid-year 2012 Top 20 Global Aerospace and Defense Company Financial Performance Analysis.

Overall, the global A&D industry posted increased operating earnings of 8.8 percent to $20.0 billion in 1H 2012, largely due to the positive impact caused by delivery of commercial aircraft, company cost cutting and efficiency initiatives in advance of expected continued declines in defense budgets, and the virtual absence of one time charges.

Commercial aerospace grew at 14.9 percent in the 1H 2012, resulting from record production of new fuel efficient aircraft. This significant increase in revenues for this segment helped the global A&D industry enjoy a 5.5 percent increase in total revenues compared to the first half of 2011, more than making up for the decrease in defense revenues.

Tom Captain, Deloitte’s U.S. and Global A&D leader comments:

“Continuation of domestic budget pressures in traditional economies, particularly in the U.S. and Europe, are resulting in lower defense budgets” he said. “Defense contractors are responding with stepped up cost cutting, acquisition activity, growth in adjacent markets and a focus on cyber-security, intelligence, surveillance and reconnaissance technologies.”

The Mid-year 2012 Top 20 Global Aerospace and Defense Company Financial Performance Analysis was compiled by comparing and contrasting the performance of the top 20 global A&D companies’ commercial and defense segments on the metrics of revenue, operating earnings and operating margins. These companies represent approximately 71 percent of total global industry revenue. This report used the latest unaudited data through June 30th, 2012 for each company. To view a copy of the report, please visit: TBD