By Sarah Young and Paul Sandle
LONDON (Reuters) -BAE Systems, Britain’s biggest defence company, said earnings would rise again this year after jumping last year, as Russia’s invasion of Ukraine continues to drive military spend higher.
Demand for weapons, ammunition and military equipment has soared as Britain, the United States and other allies support Ukraine and look to shore up their own stocks due to the Ukraine conflict, which will mark its first anniversary on Friday.
“We expect continued momentum in the medium to long term as governments replenish stocks, recapitalise equipment and support allies,” BAE Chief Executive Charles Woodburn said in an interview.
BAE, whose biggest customers are the United States, Britain, Saudi Arabia and Australia, forecast earnings per share (EPS) would rise 5% to 7% this year, after it posted a 9.5% rise in underlying EPS for 2022 on Thursday, beating forecasts on strong performances from its maritime and cyber units.
BAE said it expected sales to rise by 3% to 5% this year.
Shares in BAE fell 3% to 874 pence in early trade.
The stock is up 10% in the last three months and is the top performer in Britain’s bluechip index over the last 12 months, rising by more than 50%.
Demand for submarines, fighter jets, military ships and combat vehicles boosted BAE’s 2022 order backlog to 58.9 billion pounds ($70.9 billion) from 44 billion pounds at the end of 2021.
Since the early days of the Ukraine conflict, Woodburn said BAE had increased production at its existing facilities by adding shifts, for example, and has also been expanding facilities to keep up with demand.
BAE’s outlook for this year could receive a further boost in March when an update is expected from AUKUS – the deal between the United States, Britain and Australia to provide Australia with technology for conventionally armed nuclear-powered submarines.
Details will be provided about how capability will be transferred to Australia and where the submarines will be built.
“We have a strong footprint and business across all three nations so we do hope and expect opportunities to come through the AUKUS programme,” Woodburn said.
The company, which already has a share buyback plan underway, also lifted its annual dividend by 7.6%, citing its confidence in long-term growth.
($1 = 0.8308 pounds)
(Reporting by Sarah Young; editing by William James and Jason Neely)
