Weak Book-to-Bill Ratio from Prime Contractors Shows Sales Declines Are Here to Stay
- Northrop Grumman’s 2013 sales were down 2.2% to $24.7B. Total backlog shrunk 9.3% to $37B, with a book-to-bill ratio of only 89% in 2013. Thus the company predictably provides guidance below $24B in revenue for 2014. Aerospace and Electronic systems have actually done OK, it’s really Information Systems (-10.3% Y/Y) that has been dragging down the overall topline, just as it did in 2012.
- Like Lockheed Martin and Northrop Grumman, Raytheon is closing 2013 with a modest decline in its sales, down 2.9% to $23.7B. The backlog is down by 6.9% to $33.7B (68% funded). With a 93.4% book-to-bill ratio in 2013, here too the company’s 2014 outlook anticipates another year of declining revenue. 3% growth abroad was not enough to offset lower domestic sales. Space and Airborne Systems saw the steepest revenue decrease (-7%) among divisions.
Congressional Oversight Visited Upon US Navy
- Darrell Issa [R-CA], the chairman of the House Oversight and Government Reform Committee, asked [PDF] Navy Secretary Ray Mabus to provide documents related to Glenn Defense Marine Asia’s husbanding contracts and other cases of alleged “contracting fraud and mismanagement.”
Entente More Cordiale
- Despite differences about broader EU matters, the UK and France held a summit today marking continuing rapprochement between the two countries in defense matters: UK government | Le Monde [in French].
Patriots Stay in Turkey While Syrian Talks Go Nowhere
- After saying it had picked a Chinese system, Turkey is now extending its re-opened competition for air defenses until April 30. This contract was on the agenda of French President Hollande and Defense Minister Le Drian during their visit to Turkey earlier this week. French officials had their work cut out for them as Prime Minister Erdogan still holds a grudge [in French] from the Sarkozy years. Speaking of Le Drian, he explained France’s renewed interventionism in Africa at a CSIS event last week.
- Like India last year, Turkey is among emerging economies now facing pressure on their currencies (see USD/Lira), leading to a significant rate hikes by central banks. If this EM rout persists, purchasing power loss of 20% or more in dollars/euros will prove a serious headwind against the export ambitions of Western primes. Countries already facing high current account deficits may also be less thirsty for big-ticket purchases in hard currency.
- The German Bundestag approved the federal government’s request to lengthen the stay of their 2 Patriot batteries for another year to defend Turkey from Syrian spillover. This was not entirely a foregone conclusion as the leftist SPD was only reluctantly supporting [in German] the initial deployment in 2012, on the grounds that it was a purely defensive setup and in consideration of Germany’s NATO commitment. (The SPD was still in the opposition then, they joined a “grand coalition” with Chancellor Merkel’s CDU at the end of last year.) The US and the Netherlands had made a similar decision in November 2013.
- When even the cautious UN Secretary-General Ban Ki-moon acknowledges that “not much substantive progress has been made” during peace talks between the Syrian regime and its opposition, that should settle the fact the talks were so far fruitless. A second round of discussions will take place next week.
Unmanned Truck Convoys
- The video below shows a demonstration recently held in Fort Hood, TX by the Army Tank Automotive Research, Development and Engineering Center (TARDEC), with participation from Lockheed Martin, to show an autonomous convoy in action: