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Defense industry continues to shrink in first half of 2012

New York, NY, 2 October 2012— According to a new financial report from Deloitte United States (Deloitte), Mid-year 2012 Top 20 Global Aerospace and Defense Company Financial Performance Analysis, 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.

“Continuation of domestic budget pressures in traditional economies, particularly in the U.S. and Europe, are resulting in lower defense budgets” said Tom Captain, Global A&D Sector Leader, Deloitte Touche Tohmatsu Limited. “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.”

On the other hand, 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.  

Overall, the global A&D industry posted increased operating earnings of 8.8 percent to US$20 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.

Due to these reasons, 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.

About the Report

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 30 June 30 2012 for each company. To view a copy of the report, please visit: www.deloitte.com/en/manufacturing.

Deloitte Touche Tohmatsu Limited (DTTL) Global Manufacturing Industry group

The Deloitte Touche Tohmatsu Limited Global Manufacturing Industry group is comprised of around 2,000 member firm partners and over 13,000 industry professionals in over 45 countries. The group’s deep industry knowledge, service line experience, and thought leadership allows them to solve complex business issues with member firm clients in every corner of the globe. Deloitte member firms attract, develop, and retain the very best professionals and instill a set of shared values centered on integrity, value to clients, and commitment to each other and strength from diversity. Deloitte member firms provide professional services to 80 percent of the manufacturing industry companies on the Fortune Global 500®.  For more information about the Global Manufacturing Industry group, please visit www.deloitte.com/manufacturing.

 

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte's approximately 195,000 professionals are committed to becoming the standard of excellence.

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