By Sarah Young
LONDON (Reuters) -Britain's BAE Systems (LON:BAES) forecast slower earnings growth in 2024 after a 14% jump last year, when the defence company's order backlog swelled to a record level driven by new submarine contracts and demand linked to Ukraine.
CEO Charles Woodburn said BAE, which makes submarines, Typhoon fighter jets amongst other equipment, was positioned for sustained growth in the coming years as governments spend more in defence in response to the Ukraine war, and instability in the Middle East and elsewhere.
"While most of our order volume was driven by existing programme positions that pre-date the Ukraine conflict, orders to restock and upgrade heavy armour and munitions are starting to come through," Woodburn told reporters.
Underlying earnings per share for the current year are expected to rise 6% to 8% compared to the better-than-expected 14% increase to 63.2 pence it reported for 2023.
Shares in BAE Systems were down 3% to 1,217 pence in morning trade. The stock had doubled since the beginning of the Ukraine war two years ago.
Bernstein analyst George Zhao said BAE's forecast showed the growth ramp-up was coming through.
"While a deceleration from 2023, sustaining higher growth is the key for BAE going forward," he said.
BAE is forecasting sales growth of 10-12% this year, above the 9% recorded last year.
BAE's forecasts include the $5.55 billion acquisition of Ball Aerospace, which completed earlier this month and which will boost its exposure to the satellite and space sector.
The company, whose biggest customers are the United States, Britain, Saudi Arabia and Australia, could see new orders this year for combat vehicles, Typhoon jets and munitions, according to Woodburn.
"There's a range of opportunities that we have for Typhoon, some within the Middle East and some more orders within Europe," the CEO said.
Supplying munitions for Ukraine is another area of growth for BAE, which is focused on increasing Britain's output of 155-mm artillery shells eightfold, with new capacity due to come onstream this year.
BAE increased its annual dividend by 11%.
($1 = 0.7923 pounds)