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Sun, Aug 21, 2005 - Page 12 News List

War on terror good for defense firms in US


US defense contractors are riding high these days, buoyed by rising Pentagon spending on the wars in Iraq and Afghanistan as well as the high cost of homeland security in the US-declared war on terror.

The fiscal 2006 defense budget is set to climb to US$441 billion, an increase of US$21 billion over this year. It envisions an additional US$50 billion for the wars in Iraq and Afghanistan.

The US Congress plans to approve US$79 billion for weapons systems procurement and about US$69 billion for military research and development.

Lockheed Martin, Boeing, Northrop Grumman, Raytheon, General Dynamics, Honeywell and United Technologies have all done well in the first half of this year and have a huge backlog of orders. With US President George W. Bush and Congress ready to spend, they can expect robust sales for years to come.

Lockheed Martin, the biggest US defense contractor and top seller of secure computer systems, saw net profit jump 41 percent to US$830 million in the first six months of this year.

Half-year sales rose to US$17.8 billion from US$17.1 billion in the same period last year, despite a drop in deliveries of F-16 fighter jets that cut into warplane sales.

Lockheed, which is also strong on missile defenses, integrated electronic combat systems and military space programs, projects sales for this year of up to US$38 billion and has orders worth another US$73 billion.

Boeing, the second-largest commercial aircraft maker behind Airbus, is also the second-largest US defense contractor. Sales in the first two quarters of the year were up 8 percent to US$27 billion. Earnings dropped 10 percent to US$1.1 billion due to one-time charges related to its commercial aircraft operations, but that didn't dampen the company's outlook.

Boeing's military division posted sales of US$15.3 billion in January-June, an increase of 5 percent. Operating profits rose 16 percent to US$1.7 billion.

Another big prize would be a US government contract for mid-air refueling tankers, where Boeing is competing with the European Aeronautic, Defence and Space Company (EADS).

Boeing also coordinates Future Combat Systems (FCS), an ambitious US$125 billion project aimed at making US soldiers more effective on the battlefield by integrating new weapons and communications systems. Almost all US defense contractors are participating. At the end of June, Boeing had military orders of USS$85.7 billion.

Northrop Grumman, which specializes in warships, warplanes, information technology and space, has US$57.1 billion on its order books. Half-year earnings rose from US$534 million to US$776 million last year on a decline in sales to US$13.4 billion from US$13.4 billion.

Raytheon, best-known for military electronics and weapons systems, saw sales rise 8 percent in the first half of the year to US$10.4 billion.

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