Chemring Group Plc said it wants to more than double its share of revenue from the Middle East this year and is considering a manufacturing facility in the region or in Asia-Pacific to support its foreign growth ambitions.
Revenue from the Middle East is set to double from 17.5 million pounds ($27.5 million) in 2014, Chief Executive Offer Michael Flowers said in an interview Wednesday after the U.K. defense contractor reported earnings. Chemring wants its total revenue from non-NATO states to rise to “30 percent plus” by 2017 from a historical average of 14 percent, he said.
Chemring is adjusting to business in new markets after deferrals for contracts supplying ammunition hampered first-half earnings. The company, a provider of flares used by military aircraft to decoy enemy missiles, has pursued export markets in the Middle East and in the Asia Pacific as it moves to cut its reliance on defense spending by the U.S. and its North Atlantic Treaty Organization allies.
“We have an expectation that business will happen in a certain timeframe, and in many, many nations things just don’t move at that rate,” Flowers said. “We were overly optimistic as to the timeframe we could get an order.”
Chemring posted a loss before tax of 15.1 million pounds in the first half from a profit of 5.1 million pounds a year earlier. The stock rose as much as 3.8 percent to 213.25 pence in London after the company reported a 25 percent increase in its order book to 502.8 million pounds. About 200 million pounds of that will be delivered this year, with about 200 million pounds earmarked for 2016 and the remaining 100 million pounds stretching over 8 years, Flowers said.
Discussions about an additional manufacturing facility are at an early stage, and Chemring may opt to set up shop instead in Asia Pacific, Flower said.
While suffering delays, no contracts in the Middle East have been canceled, and full-year guidance is unchanged, said Flowers, who marks his first year in the position Wednesday.
“What we are working with our sales teams on is for them to become more reliable in their predicting of order intake times,” Flowers said in a phone interview. “To get a greater understanding of what is required and what will the likely time frame be -- then adding three months.”