Profits of defense giants to shrink in 2022
The world's 100 largest arms companies will record lower revenues in 2022 despite the war in Ukraine. According to a survey by the Stockholm-based peace research institute Sipri, the companies also secured significantly more orders.
Despite increased demand due to the war in Ukraine, the profits of the world's largest arms companies fell in 2022. Sales of weapons and military services by the 100 largest arms companies amounted to 597 billion dollars (around 549 billion euros) last year, according to a recently published report by the Stockholm International Peace Research Institute (Sipri). According to the report, turnover fell by 3.5 percent compared to 2021.
Sipri researcher Diego Lopes da Silva said the figures were "unexpected" against the backdrop of geopolitical tensions and the Russian invasion of Ukraine. The decline shows "that there is a time lag between a demand shock like the war in Ukraine and the ability of companies to ramp up production and really meet demand," Lopes da Silva explained.
According to Sipri, the decline is largely due to lower profits at US companies, which have had to contend with "supply chain problems and labor shortages" in connection with the coronavirus pandemic. US sales fell by 7.9 percent, but still accounted for 51 percent of total profits in 2022. 42 of the top 100 defense companies were from the US.
German companies report slight increase
Russian defense companies saw their profits slump by twelve percent to 20.8 billion dollars. According to Lopes da Silva, this was partly due to Western sanctions and partly to the lack of payments from the Russian state. It was also more difficult to obtain data from Russia, which is why only two Russian companies were included.
According to Sipri, arms manufacturers in the Middle East, Asia and Oceania were able to react more quickly to the growing demand because the weapons systems produced there are less complicated than in the USA. Turkish arms companies in particular benefited from the high demand, especially the drone manufacturer Baykar, whose products are used in Ukraine. The second largest arms manufacturer, China, was able to increase its revenue by 2.7 percent to 108 billion dollars. In contrast, the four German companies on the Sipri list reported an average increase of 1.1 percent, raking in 9.1 billion dollars. For trans-European companies such as Airbus, Sipri calculated an increase of 9.6 percent.
According to Lopes da Silva, there is no sign of a decline in demand. "We have seen in the company reports that incoming orders and order backlogs are increasing strongly." Sipri therefore assumes that military spending will continue to rise and that the profits of defense companies will ultimately also increase.
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The decline in profits of the world's largest arms companies in 2022, despite the war in Ukraine, was particularly notable for US companies due to supply chain issues and labor shortages related to the pandemic. (US, profits, 2022)
There was a debate on arms deliveries to Ukraine during the year, with Turkey benefiting from increased demand for its drone manufacturer Baykar's products. (Ukraine, arms deliveries, Turkey, Baykar)
Despite lower revenues for Russian defense companies due to sanctions and payment issues, there's an ongoing concern about the potential for increased military spending and profits in the arms trade globally. (Russia, sanctions, military spending, arms trade)
Source: www.ntv.de
