BAE Systems Says Earnings May Suffer as Saudi Jet Talks Drag
BAE Systems Plc (BA/) said its full-year earnings may be reduced by about 3 pence a share if talks with Saudi Arabia over the pricing of Eurofighter Typhoon combat jets don’t conclude this year.
“Whilst progress has been made through the course of these negotiations, issues remain to be resolved before contract pricing, acceptable to all parties, can be agreed,” London- based BAE said in a statement. Analysts surveyed by Bloomberg predict full-year earnings of 34 pence a share, based on 13 estimates.
BAE has delivered 24 of 72 Typhoons ordered as part of the government-to-government contract between the U.K. and Saudi Arabia under the so-called Salam program. Europe’s biggest weapons maker builds the model in cooperation with allies European Aeronautic, Defence & Space Co., parent of Airbus SAS, and Italy’s Finmeccanica SpA. (FNC)
“We are not surprised to see the Salam delay given the complexity of the program and unpredictable timing for defense export contracts,” Robert Stallard, a London-based analyst for RBC Capital said today. The warning is “an earnings neutral event” although the development is “unhelpful, especially with BAE’s U.S. business likely to see further U.S. Department of Defense budget cuts,” he said.
BAE fell as much as 2.4 percent and was trading 0.9 percent lower at 342.90 pence as of 3:27 p.m. in London. The stock has advanced 20 percent so far this year.
“All parties remain committed to the program,” said BAE, which has the role of prime contractor to the U.K. government. Discussions concern “acceptable pricing” rather than the timing of the settlement, it said.
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