BAE Systems, the defence manufacturer, revealed yesterday that it was more reliant than ever on sales to oil-rich nations such as Saudi Arabia as a big drop in military spending in the United States and Britain led to a substantial decline in full-year profits.
The company, which announced merger talks with rival EADS last year before abruptly dropping the plan, said profits for last year fell by 6.4 per cent. Earnings before interest, tax and amortisation dropped to £1.89 billion (Dh10.58bn) in the year to the end of December, down from £2.02bn in the previous year.
The company said sales fell 7 per cent to £17.83bn and that the outlook for the year ahead would be tough.
"Growth opportunities in some segments of the US and UK markets are identified, but the overall outlook in both countries is expected to continue to be constrained," the company said. "Subject to near-term uncertainties relating to US defence budgets, modest growth in underlying earnings per share is anticipated for 2013."
The company added that while Saudi Arabia was one of its biggest customers, it had failed to resolve discussions about the price of fighter jets it is selling to the kingdom.
The so called "Salam" Typhoon fighter jet contract with Saudi Arabia is so important that its successful resolution would add as much as 3 pence per share to earnings and reverse much of the decline that hit the company last year.
The Typhoon contract is just one of BAE's major defence deals with Saudi Arabia.
"Under the Saudi British Defence Cooperation Programme, orders totalling £3.4bn were awarded for support through to 2016, including the provision of manpower, logistics and training to the Royal Saudi Air Force (RSAF).
"In addition, a £1.6bn contract was awarded in May to support the RSAF's future aircrew training requirements involving the supply of, and initial support for, Hawk Advanced Jet Trainer and Pilatus training aircraft, " the company said.
In Oman, meanwhile, a £2.5bn contract for 12 Typhoon and eight Hawk aircraft and associated training and support was awarded to BAE and in June the company won a $750 million (Dh2.75 billion) combat vehicle contract in Norway.
BAE is also in discussions with the UAE over the sale of Typhoon fighter jets but the Government is also weighing up French rival Dassault's Rafales planes as it seeks at least 60 new aircraft to replace its fleet of Mirages.
BAE systems announced a major £1bn share buy-back programme yesterday that sent the shares up as much as 6 per cent on the London Stock Exchange.