BAE Systems chief sees encouraging outlook for Typhoon orders in Middle East

BAE Systems sees an "encouraging" outlook for Typhoon orders from the region despite slowing overall production of the fighter. (Reuters)
Updated 22 February 2018
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BAE Systems chief sees encouraging outlook for Typhoon orders in Middle East

LONDON: The chief of Britain's biggest defense company said he was encouraged by the outlook for orders of the Typhoon fighter jet in the Middle East.
But BAE Systems forecast flat earnings overall in 2018 as it adjusted to lower production of the aircraft.
“The opportunity pipeline - in terms of campaigns in Europe and in the Middle East is as good as we’ve seen it,” BAE Systems’ CEO Charles Woodburn said
in a webcast following the announcement of the UK-headquartered company’s annual results.
“It certainly encourages us we will see growth coming into the next decade in Typhoon production,” he said.
His comments come as Typhoon production has slowed, at the cost of jobs, with the company announcing last October it would make nearly 2000 job cuts, due in part to a lack of jet orders.
BAE’s earnings statement released on Feb. 22 said that overall sales of airborne vehicles is expected to be 5 percent lower due to the completion of Typhoon contracts with Europe, Saudi Arabia and Oman.
Last year, the first eight Typhoon and all eight Hawk aircraft for Oman were delivered. The four remaining Typhoon aircraft are due to be delivered this year.
Typhoon support service packages are now helping deliver more revenue than aircraft production, and this is an area that is expected to grow, said Woodburn.
However, he said he expected Typhoon production will start to stabilize in coming years, particularly due to the confirmed £5 billion contract with Qatar, secured last December, to supply 24 Typhoon aircraft.
“We continue to pursue further export opportunities which if secured would drive growth back,” he said in his presentation.
Woodburn’s optimism could revive hopes in the industry that there might be progress on the much-anticipated, but yet to materialize deal to sell 48 Typhoons to Saudi Arabia.
Saudi Arabia accounted for 16 percent of BAE Systems’ total sales last year, with the US remaining the company’s biggest market accounting for 39 percent of sales.
Overall, BAE Systems’ sales were up by £0.6 billion to reach £19.6 billion in 2017. Operating profit decreased to £1.48 billion from £1.74 billion recorded in 2016.
“With an improving outlook for defence budgets in a number of our markets, we are well placed to generate good returns for shareholders,” Woodburn said in an official statement. 

The company decided on a final dividend of 13 pence per share, making a total of 21.8 pence per share for the year, marking an increase on 2 percent on 2016.


Stronger US dollar unlikely to derail bullish view on commodities — Goldman Sachs

Updated 28 min 51 sec ago
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Stronger US dollar unlikely to derail bullish view on commodities — Goldman Sachs

  • The dollar has been lifted by a stronger-than-expected US economy, the world’s largest
  • A stronger greenback makes the purchase of dollar-denominated international commodities more expensive for holders of other currencies

BENGALURU: Goldman Sachs said a stronger dollar is unlikely to derail its bullish view on commodities, which are likely to find support from physical shortages.
The dollar has been lifted by a stronger-than-expected US economy, the world’s largest, and that’s a positive sign for global growth, the US investment bank said.
The US dollar index has lost more than 1 percent this week, but this follows months of strong demand over US-China trade-related tensions, as investors bet the greenback would gain at the expense of riskier currencies.
“The risk aversion this summer created significant emerging market destocking, particularly in China, as consumers attempted to avoid a strong dollar and tariffs by liquidating inventories,” Goldman said in a note dated on Thursday.
A stronger greenback makes the purchase of dollar-denominated international commodities more expensive for holders of other currencies, making buyers and users more likely to draw on any stored materials in preference to imports.
“This liquidation, however, has a physical limit with Chinese destocking having already created significant increases in physical (premiums) for oil and metals – a sign of physical shortages.”
Going forward, oil had a strong fundamental outlook helped by US demand growth, supply losses and disruptions, and still constrained US shale output, Goldman said.
The bank said its near-term Brent crude oil price target remained at $80 a barrel.
The bank said it was moderating its bullish view for gold due to a sell-off in emerging markets, and it lowered its 12-month price forecast for the metal to $1,325 per ounce, down from $1,450 an ounce earlier.