Defense companies take in less according to report

Military - Defense companies take in less according to report

The revenues of the world's 100 largest arms companies have fallen despite the war in Ukraine. According to a report published by the Stockholm-based peace research institute Sipri, they amounted to 597 billion dollars (around 543.4 billion euros) in 2022, which corresponds to a decrease of 3.5 percent compared to the previous year. This is due to capacity problems. At the same time, companies have acquired significantly more orders. Sipri therefore anticipates considerably higher profits in the coming years.

Companies in the USA and Russia contributed the most to the decline in revenue. According to Sipri, US defense companies recorded combined revenues of 302 billion dollars. This corresponds to a decline of 7.9 percent. Russian companies had to cope with a decline of 12 percent. In contrast, the four German companies on the Sipri list - Rheinmetall, ThyssenKrupp, Hensoldt and Diehl - reported an average increase of 1.1 percent. For trans-European companies such as Airbus, Sipri calculated revenues of 19.7 billion dollars and an increase of 9.6 percent. Companies in Israel, Turkey and South Korea also recorded higher revenues.

Sipri explained that the Russian invasion of Ukraine and global tensions caused demand for weapons and military equipment to skyrocket in 2022. However, companies currently have too little capacity. "Many arms companies have encountered obstacles when switching production to high-intensity warfare," said Sipri arms expert Lucie Béraud-Sudreau.

Increase in revenue for German arms companies

In North America and Europe, many companies took a long time to expand their production. They were already having difficulties with this before the war in Ukraine. Some of their unfinished orders date back to this time. In addition, there is a shortage of raw materials, rising inflation and the effects of the coronavirus pandemic on supply chains and the personnel situation. The orders received in 2022 will probably not be reflected in companies' balance sheets for another two to three years, said Sipri researcher Nan Tian.

In 2022, the war in Ukraine had virtually no impact on the revenues of the largest US defense companies. They were still working off orders from before the war. General Dynamics, for example, is the only private company in the USA that manufactures 155-millimetre shells, which are being fired en masse in Ukraine. Nevertheless, it recorded a 5.6 percent drop in revenue in 2022 and explained that it was only seeing signs of increased demand. The missile specialist Lockheed Martin had an order backlog of 150 billion dollars, but recorded a fall in revenue of 8.9 percent and did not expect any short-term increases in revenue due to the war in Ukraine in view of the long production cycles.

German defense companies nevertheless recorded an increase in revenue. They took in 9.1 billion dollars, with only ThyssenKrupp recording a decline. Airbus' defence revenues rose by just under 1.7 billion to a good 12 billion dollars. This was an increase of 17 percent.

Companies in the Middle East and East Asia were apparently better prepared for the increased demand. The Israeli defense company Rafael, Baykar from Turkey and the South Korean company Hyundai Rotem reported rising revenues, mainly due to orders from Europe. At Baykar, they even rose by 94 percent. Turkish companies also benefited from arms deliveries to the Middle East.

Few data from Russian companies

"Companies in China, India, Japan and Taiwan have all benefited from continued government investment in military modernization," said Sipri expert Xiao Liang. Such companies usually have a strong network of local suppliers and can thus mitigate disruptions to the global supply chain and respond more quickly to additional orders. Rafael also has a plant in Germany.

Overall, according to Sipri, the revenues of the world's 100 largest defense companies in 2022 were still significantly higher than in 2015, when the institute included Chinese companies in its top 100 list for the first time, despite the decline. The largest group continues to be US companies, 42 of which are on the list, generating 51 percent of total revenue. Chinese companies followed in second place, reporting a 2.7 percent increase in revenue to 108 billion dollars, accounting for 18 percent of total revenue.

According to Sipri, there was little data available from Russian companies. As a result, only two of them were included in the list in 2022. They recorded a 12 percent drop in revenue to 20.8 billion dollars. Sipri cited high inflation and the decline in Russian arms exports as the main reasons. In addition, the companies were working off armaments stocks from the Soviet era, which is not so well paid.

Sipri

Read also:

• Xhaka ahead of the European Championship: "Hope we keep our tongues in our mouths"
• Diplomatic efforts to de-escalate continue
• Homes as AI laboratories: research into human behavior

1. Despite the war in Ukraine, the revenue of Turkish defense company Baykar increased significantly, primarily due to orders from Europe.
2. According to Sipri, the Israeli defense company Rafael also saw a rise in revenue, partly thanks to a plant in Germany and orders from Europe.
3. Companies in South Korea, such as Hyundai Rotem, also reported higher revenues due to orders from Europe.
4. The Ukrainian war had minimal impact on the revenues of the largest US defense companies in 2022, as they were still working off orders from before the conflict.
5. German defense company Airbus saw a significant increase in defense revenues, going from roughly 10.3 billion dollars in 2021 to 12 billion dollars in 2022.
6. In contrast to the trend of rising revenues, ThyssenKrupp reported a decline in defense revenues in 2022.
7. The Russian invasion of Ukraine led to a surge in demand for weapons and military equipment in 2022, but many companies struggle with capacity issues.
8. Sipri highlighted that Russian companies had a 12% decline in revenue, which they attributed to high inflation, decreased arms exports, and working off Soviet-era stocks.
9. German defense companies, including Rheinmetall and Hensoldt, experienced an average increase of 1.1% in revenue in 2022.
10. The defense industry continues to see high revenues compared to 2015, with US companies remaining the largest group, accounting for 51% of total revenue.
11. Some European countries, like Sweden, may consider increasing their military spending in light of geopolitical concerns, potentially boosting contracts for defense companies.

Source: www.stern.de