BAE Systems returns to profit in first-half despite cuts to national defense budgets

BAE Systems returns to H1 profit

LONDON — BAE Systems PLC, Europe’s largest defense contractor, said Thursday that costs cuts and a focus on emerging markets helped it make a profit in the first half, reversing a year-ago loss despite worries about reductions to national defense spending.

BAE’s net profit of 618 million pounds ($965 million) for the six months to June 30 compared with a loss of 82 million pounds a year earlier. The loss was partly due to big impairment charges on two U.S. businesses and expenses related to currency movements, the reevaluation of financial instruments, and pension accounting.

Revenue was up 9.3 percent to 10.6 billion pounds from 9.7 billion pounds, and the company said it expected to grow in 2010 despite a “challenging trading environment” as governments cut costs to trim budgets.

“We see good opportunities for sustainable growth within the group including building on our seven home markets and our substantial presence in customer support and services,” said Chief Executive Ian King. “We have a proven track record of delivering reduced costs and enhanced capability for our customers and expect to continue to drive performance from our large order book.”

However, the London-based maker of Challenger tanks, Tornado jet fighters and Astute submarines revealed that the value of its order book fell to 43.6 billion pounds from 44.3 billion pounds a year ago.

BAE has already begun a substantial program to reduce costs and improve efficiency, including cutting 3,300 jobs in the first half of the year from its worldwide workforce of around 100,000.

It is also plans to reorganize its North American business, where it generates more than half its sales, to improve competitiveness and focus on building new “home markets” amid cuts to U.S. and British defense expenditure.

The company counts Britain, the U.S., Australia, India, Saudi Arabia, South Africa and Sweden as its “home” markets.