BAE expects Saudi jet deal to close this year

  • Share via facebook
  • Tweet this
  • Bookmark and Share
A BAE Systems Eurofighter aircraft shown during the Dubai Airshow

A BAE Systems Eurofighter aircraft shown during the Dubai Airshow

BAE Systems Plc said it expects a long-awaited multi-billion dollar Saudi jet deal to complete in the second half of this year, enabling it to forecast a more than 10 percent lift to yearly underlying earnings.

BAE, part of the consortium alongside Airbus and Finmeccanica which builds the Typhoon or Eurofighter jet, has been locked in pricing negotiations with Saudi Arabia over the Gulf state's order of 72 jets, which both parties first signed in 2007.

The so-called Salam order was previously said to be worth around 4.5 billion pounds ($6.8 billion).

"In terms of Salam, we do expect that we will close this out in the second half," Chief Executive Ian King told reporters.

"There is ... quite increasing appetite to talk about the next batch of aircraft," King said, noting the two sides needed to finalise the pricing of the first batch before moving on to discussing any subsequent order.

King said the Saudi airforce could order a further 48 to 72 planes. The company has continued to develop its Saudi business as the talks went on and in June signed a 1.8 billion pound contract for follow-on support for the Salam programme.

International sales to countries such as Saudi Arabia have become increasingly important to BAE, which has made exports and niche markets such as cyber security its priority as defence budgets shrink in the United States and Europe.

Shares in BAE, whose $45 billion attempt to merge with Franco-German Airbus collapsed last year after government opposition, were up 1.6 percent at 453.1 pence by 0723 GMT, among the top 10 risers on the FTSE 100 index.

The stock rose as high as 457.7p, its highest in nearly five years.

Some analysts said the Salam deal looked as good as sealed.

"Consider it done," analysts at brokerage Jefferies said. "We see much in the first-half 2013 result that should lend credibility and solidity to earnings in full-year 2013 and ... 2014."

Britain's largest defence contractor, which previously said it had only expected "modest growth" in earnings, has repeatedly said its profits and sales have been weighed down by the deal's delayed conclusion. It said last year that it expected the talks to be completed by the end of 2012.

The company said the slightly improved outlook also took into account a 1 billion pound share repurchase programme it had launched in February, along with the impact of U.S. budget cuts.

It said earnings before interest, taxes and amortization (EBITA) fell 6 percent over the first half of the year to 865 million pounds, on a 1 percent rise in sales to 8.45 billion. Its underlying earnings per share fell 4 percent.

Analysts on average were expecting first-half EBITA of 885.67 million pounds, Thomson Reuters data showed.

BAE also raised its interim dividend by 3 percent to 8 pence per share. Its order book rose to 43.1 billion pounds from 42.2 billion at the end of last year.

The United States, which accounts for about 40 percent of BAE's sales, began reducing its spending by $37 billion for the fiscal 2013 year in March and its budget is set to shrink by $50 billion annually over the next nine years, unless Congress acts to avoid these cuts."

BAE said it expected U.S. trading to remain tough but manageable, while the UK would remain stable. Orders from international customers, which totaled 4.8 billion pounds over the six months, and from the UK were helping make up for poorer U.S. demand, it said.

Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

Enter the words above: Enter the numbers you hear:

All comments are subject to approval before appearing

Further reading

Features & Analysis
Making Connections: Lou Lou Khazen Baz

Making Connections: Lou Lou Khazen Baz

In the space of just two years Nabbesh has grown from a bold...

Building a BIZness: Q&A with Hazel Jackson

Building a BIZness: Q&A with Hazel Jackson

Since landing in Dubai in the 1990s, Hazel Jackson has built...

Do celebrity branded projects ever work?

Do celebrity branded projects ever work?

The long list of celebrity-endorsed real estate developments...

Most Discussed
  • 10
    UAE teens among the highest for obesity rates

    Everyone in UAE knows that biggest is best.

    UAE may not light up the international league tables in standard of living, education standards, press... more

    Friday, 29 August 2014 4:20 PM - Proud UAEer
  • 9
    Saudi Arabia seeks talks on hiring of Sri Lankan maids

    perhaps the unemployed saudi men or the millions of women who are not allowed to work could pick up a broom and start sweeping their own houses. more

    Sunday, 31 August 2014 3:28 PM - nice
  • 9
    Smoke-free Dubai - the big debate

    Surprisingly the only studies that show a negative financial impact of the smoking ban on the hospitality industry are sponsored by tobacco companies ... more

    Wednesday, 27 August 2014 4:19 PM - Telcoguy
  • 24
    World's most pierced man refused entry to the UAE

    Tolerance has its limits everywhere including Dubai and those who considered Dubai a lawless circus were held thank you Dubai authorities... more

    Thursday, 21 August 2014 10:51 PM - Khalil
  • 23
    Baby NOT on board?

    Some of you cry babies need to get your own personal apartments on the plane ! You cry more then the babies I have seen in my travels. LOL more

    Thursday, 28 August 2014 9:10 AM - Jim
  • 21
    Israel “must be punished” over Gaza, says Dubai police chief

    This high moral ground that Mick is talking abt sound very familiar. May I remind Mick that the US & its British ally alone killed over 1 million innocent... more

    Thursday, 7 August 2014 4:12 PM - Mathew