Taking stock of the situation

["Michael Keaney" <Michael.Keaney@xxxxxx>]

BAE soars on sales hopes

Most military budgets expected to rise

David Gow
Friday September 14, 2001
The Guardian

Expectations of a substantial increase in military spending in the wake
of the attacks in the US drove shares in BAE Systems,
Britain's premier defence group, steeply higher yesterday.

BAE's stock rose 12.5% to 348.75p as investors calculated that not only
the US but European and other governments would approve
significant rises in defence budgets to boost global security.

Sir Dick Evans, BAE chairman, condemning Tuesday's attacks as assaults
"on the entire civilised world community", refused to
speculate on likely gains for BAE. "The world is simply not going to be
the same place again."

The group, hammered by a profits warning in January, announced
first-half pretax earnings up 4% at £482m, partly driven by rising
sales in its north American business, and a record order book of
£45.4bn.

Sir Dick and senior colleagues, who expect an even better outcome in the
second half, said growth in the company's performance
would resume next year as planned - despite scaling back likely
deliveries of Airbus commercial aircraft this year and next.

Senior executives believe the Bush administration will, on balance,
proceed with both the controversial national missile defence
system and the new joint strike fighter, potentially the world's most
lucrative military contract.

Boeing and Lockheed Martin are vying to win the JSF contract, worth up
to $40bn with export sales, while BAE has links to both
contenders. President Bush is expected to choose a prime contractor
later this autumn.

BAE's optimism even extends to Europe where the UK has said defence
spending during the past year fell to £24.8bn, the equivalent
of just 2.5% of GDP compared with 3.9% a decade ago. John Weston, chief
executive, said the political will to spend more had not
altered.

But the group expects production and delivery of Airbus planes to fall
to 330 this year and 350 to 370 next year.

Full article at:
http://www.guardian.co.uk/business/story/0,3604,551659,00.html

Michael Keaney
Mercuria Business School
Martinlaaksontie 36
01620 Vantaa
Finland

michael.keaney@xxxxxx