Report: Defense firm revenues drop 1 percent in 2012

Revenues of the world’s top defense firms decreased 1 percent in the first half of 2012 compared to last year, according to a new report from Deloitte.

The report found that of the top 20 global aerospace and defense companies, defense contractors saw revenues drop $1.3 billion in the first six months of 2012, on top of a 3.3 percent decline in 2011 revenues.

The study cited domestic budget pressures in and shrinking defense budgets in both the United States and Europe for the drop, as companies prepare for slimmer times following a decade of rapid growth in the defense industry.

Tom Captain, head of global and U.S. aerospace and defense analysis for Deloitte, said in a statement releasing the report that the defense companies are responding to the budget pressures with “stepped up cost cutting, acquisition activity, growth in adjacent markets and a focus on cyber-security, intelligence, surveillance and reconnaissance technologies.”

For aerospace companies, however, the 2012 picture is brighter. Commercial aircraft revenues grew 14.9 percent in 2012 compared to last year, spurred by record production of fuel-efficient aircraft.

As a result, the combined defense and aerospace sector saw revenues jump by 5.5 percent compared to the first half of 2011.

The defense budget picture in the U.S. remains uncertain due to the across-the-board cuts that could cut Pentagon budgets by $500 billion over the next decade, but no matter what happens with sequestration, the defense budget is trending downward.

In addition to the drawdowns of the wars in Iraq and Afghanistan, the Pentagon already has plans to cut $487 billion from its budget over the next 10 years, regardless of the outcome of sequestration.

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