BAE Systems Outlook Unchanged, As Long As It Gets Better Saudi Deal

Aerospace and defence giant BAE Systems Thursday said trading in the third quarter had met its expectations and its outlook remains unchanged, as long as it can successfully conclude talks with Saudi Arabia on improving its deal to supply Eurofighter jets to the country and the US government shutdown isn't too protracted.

BAE Systems signed a GBP4.5 billion deal to sell 72 of the Typhoon jets to the Saudis in 2007, but is now trying to negotiate a better price. The programme is known as the Salam deal.

"The group's guidance continues to anticipate a satisfactory completion to the Salam pricing negotiations this year. However, should negotiations extend beyond the year end, earnings per share for 2013 would be impacted by approximately 6 to 7 pence," BAE warned in a statement.

The company also said it hadn't been materially hit by the US government shutdown yet, but would be if it is protracted. "Some progressive impact to the group's US operations would result from a protracted government shutdown," it said. Since the October 1 shutdown, it has told about 1,200 of its staff in its Intelligence & Security and Support Solutions businesses not to report to work.

The company said it was continuing discussions with the UK Ministry of Defence about amending its contract to build Britain's new Queen Elizabeth class aircraft carriers "to reflect the increased maturity of the programme." It is also talking with the MoD about meeting demand for other new warships it is building for the Royal Navy, like the fleet of Type 45 Destroyers.

BAE Systems said activity in other markets remains "vibrant" with several opportunities being pursued including a contract to supply Eurofighters to United Arab Emirates. It said it has taken GBP5 billion of orders outside the UK and US in the year to date.
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