Aerospace, defence business sluggish in 2011: Study

July 11th, 2012 - 12:02 am ICT by IANS  

New Delhi, July 10 (IANS) The global aerospace and defence industry performance in 2011 was sluggish, posting a revenue gain of just 2.3 percent compared to 2.5 percent in 2010, an industry study has found.

The study, released by Deloitte Touche Tohmatsu Limited’s (DTTL) Global Manufacturing Industry group, saod the financial performance of global aerospace and defence industry generally fell that year, though in whole terms it had grown to $681 billion despite the uncertainty in the defence sector.

The 2011 Global Aerospace and Defence Industry Performance Wrapup also found that reported operating earnings for the global industry decreased 3.1 percent, as did reported operating margins by 5.3 percent, free cash flow by 13.3 percent, and reported operating earnings per employee by 5.2 percent.

On the positive side, the report found that book to bill (BTB) ratio, an indicator of future revenue growth, increased 17.4 percent, primarily as a result of higher sales of new fuel-efficient commercial aircraft.

According to the report, the financial performance differences widened between the commercial and defence segments in 2011 - commercial revenues grew 10.1 percent while defence revenues declined by 3.3 percent.

The report also suggested that factors contributing to the growth of commercial revenues were record production levels of large commercial aircraft and increases in demand for aircraft services.

Additionally, the report indicated that defence revenues were likely impacted by decreased defence budgets, competing domestic priorities, weaker than expected economic performance in the western world, and the drawdown of forces in Iraq and Afghanistan.

“With the defence segment comprising about two thirds of the global aerospace and defence industry, the 2011 global industry performance wrapup suggests that a continued uncertain defence outlook is likely to impact overall financial performance in 2012,” DTTL global aerospace and defence leader Tom Captain said.

“However, the report findings indicate that defence spending is increasing in geographies such as India, China, Japan, the United Arab Emirates, Saudi Arabia, and Brazil as a result of increases in wealth and in light of growing national security concerns,” he added.

DTTL’s India director Nidhi Goyal said: “While India has a major procurement programme due to increasing requirement in both aerospace and defence, which is not only attractive for Indian industry but also for companies in Europe, US and other regions.”

The report found that regionally, the financial performance differences between aerospace and defence companies based in Europe and the US continue to diverge.

According to the report, the European industry grew less than one percent (only 0.8 percent) while the US industry achieved 3.3 percent revenue growth in 2011.

“This is the right time to tap Indian aerospace market as India has ambitious plan to enhance its capabilities with procurement and support from overseas companies. This may help industry to boost their revenues and also plan to consolidate later amidst low cost advantage in India,” Goyal added.

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