Defence companies secure record orders PHOTO

The two largest US defence contractors said ongoing supply chain challenges are hampering efforts to deliver on record weapons orders, driven by the conflict in Ukraine and tackling China’s military expansion.

Lockheed Martin Corp. said worker shortages have hampered production, while the Pentagon has sped up purchases of weapons headed to Ukraine. Raytheon Technologies Corp. said it would be the end of the year or beyond before production of some materials returns to prepandemic levels, Fox Business reports.

The two companies have been the biggest beneficiaries of the $27 billion in military equipment committed by the US to Ukraine, in terms of contracts awarded, though so far only $6.6 billion is under contract to industry.

Executives have cited shortages of labor and components such as chips and rocket motors, as well as the need for more certainty that orders will follow if companies invest more to boost capacity.

Defence sales at both companies fell last year compared with 2021, according to quarterly results released Tuesday.

"We’ve got the orders, we’ve got the capacity," Raytheon Chief Executive Greg Hayes said on an investor call. "We just need to bring the materials in." 

Jay Malave, Lockheed Martin’s chief financial officer, said contracts are being awarded at a faster clip. "The DOD has accelerated their speed to get them where they want to be," he said.

Lockheed Martin, which also makes F-35 combat jets, has said it would take two years to double production of Javelin antitank missiles, co-produced with Raytheon, and Himars rocket launchers, both being widely used by Ukraine in its conflict with Russia.

Mr. Malave said suppliers stepped up to a faster production pace in the final quarter of last year, helping boost Lockheed Martin’s quarterly sales to $19 billion, about 3% above the company’s internal planning.

"The whole value chain has been able to operate at a higher level," he said, though metrics such as on-time deliveries didn’t improve much in the fourth quarter and labor shortages continue to pinch production.

Lockheed Martin reported a net profit of $1.91 billion for the quarter ended Dec. 31, compared with $2.05 billion a year earlier. Per-share profit slipped to $7.40 from $7.47, just short of the consensus forecast of analysts polled by FactSet. Its order backlog topped $150 billion in 2022. Lockheed Martin left its existing guidance for flat sales in 2023 largely unchanged, forecasting a return to growth in 2024 when the supply chain improves.

Raytheon reported profit of $1.4 billion for the quarter ended Dec. 31, compared with $685 million a year earlier. Per-share profit rose to 96 cents from 46 cents, and sales climbed almost 6% in the quarter to $18.1 billion, lifted by commercial aerospace engines and parts.