Increasing defense spending worldwide will drive “tremendous growth” in the global defense industry over the next decade, says a report by the international professional services firm PricewaterhouseCoopers (PwC).
Sales at the top 100 defense companies worldwide have climbed for six straight years and 2023 should be a “year of significant growth,” the firm says in the 2023 edition of its report, PwC’s global aerospace and defense: Annual Performance and outlook, which was released last week.
The U.S., China and Russia accounted for 56 percent of global defense spending in 2022, which was up 3.7 percent overall to $2.24 trillion, the report says.
Despite the strong global defense growth in 2022, the top companies didn’t benefit. The report says that sales for the 11 defense companies declined 4 percent versus 2021 while operating profits as a whole fell 25 percent, while sales at the top six U.S. defense companies fell 3 percent overall and their aggregated operating profit dropped 29 percent.
For U.S. companies, the top-line decline was due to ongoing “supply chain disruption and labor shortages,” PwC says. And most of the bottom-line trouble was due to Boeing [BA], which suffered from charges on a number of programs, it says. Of the top companies, only Northrop Grumman [NOC], France’s Thales, and L3Harris Technologies [LHX] “reported modest profit improvements,” the report says.
Lockheed Martin [LMT], which in 2022 was overtaken by Raytheon Technologies [RTX] and Boeing, respectively, as the largest global aerospace and defense contractor, was the most profitable company with $8.3 billion in profit, down 8.5 percent from 2021. Airbus, which is ranked fourth in global aerospace and defense sales last year, was the second most profitable company with $5.6 billion in profit.
PwC says European defense all boasted higher sales in their local currencies as defense budgets in Europe are increasing due to Russia’s war against Ukraine.