Deloitte: Defense Industry Revenues Getting Smaller

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.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. This according to a new financial report from Deloitte, Mid-year 2012 Top 20 Global Aerospace and Defense Company Financial Performance Analysis.

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.”

Operating margins increased 3.0 percent in 1H 2012 to 8.4 percent. Commercial aerospace companies enjoyed a significant jump of 29.2 percent in earnings, while the defense segment stayed flat at a nominal increase of 1.5 percent in earnings. Similarly, commercial aerospace operating margins increased 12.4 percent, while defense companies increased 2.6 percent in this important financial metric.