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Northrop Grumman Q1/09 Results
Northrop Grumman Corporation (NYSE:NOC) reported $8.3 billion in sales in the first quarter of 2009, an increase of 8% compared to the first quarter of 2008. However, last year, Northrop Grumman's quarterly performance was hit by a $326 million charge in the shipbuilding sector which adversely effected net earning. Their Q1/08 sales were reduced by $134 million due to these shipbuilding issues.
The company reported higher segment operating income from all five operating sectors - new business awards totaled $7.1 billion in the 2009 first quarter and the total backlog stands at $76.9 billion. Electronics Systems experienced the highest growth (16%) and operating margins (10% increase) while aerospace demonstrated the lowest growth (4% sales, 2% operating income).
Growth at the Aerospace Systems business was attributed mainly to unmanned systems programs, including Broad Area Maritime Surveillance (BAMS) Unmanned Aerial System, Unmanned Combat Air Systems Carrier Demonstration (UCAS-D), and Global Hawk. The company is also working on F-35, Joint STARS, B-2, and F/A-18; as well as some black programs. The higher pace of activity of these systems compensated for the negative effects, derived from the cancellation of the Air Mobility Tanker replacement program (KC-45), and some financial delays related to the E-2D Advanced Hawkeye. Electronic Systems sales including the LAIRCM missile defense systems, and the Space Based Infrared System (SBIRS) program. Shipbuilding sales increased 9 percent, contributed from the recently delivered LHD 8 amphibious assault ship, Virginia-class submarine, and aircraft carrier programs. These gains were partially offset by slower DDG 51. First quarter 2009 operating income includes adjustments for cost growth on the DDG 51 program and LPD 22, as well.
"We believe that Northrop Grumman is very well aligned with the priorities that Secretary Gates has outlined " Said Ronald D. Sugar Chairman & Chief Executive Officer of Northrop Grumman. No major prime Northrop Grumman programs were recommended for cancellation and the greater emphasis on areas relevant to the company strengths promise new future opportunities, including cyber security, intelligence surveillance and reconnaissance, command, control, and communications, and in unmanned air vehicles.
Destroyer Construction Swap is Good News for Northrop Grumman
Sugar also added that the swap of the DDG-1000 and DDG-51 destroyer work is a good outcome for all parties. "We believe the swap supports our strategy to improve shipbuilding execution by allowing us, and the Navy to capture the value of serial production of ships in economic order quantities." Sugar added that his company will continue to provide significant work share on the program, including the sucker structure; hanger and the peripheral vertical launch system for all three ships, all made of composite materials.
"We have learned a lot of lessons over the last 15 months from the LHD 8 experience and the consolidation of the shipyards. Our Gulf Coast shipyards are most successful when we have serial, uninterrupted production. Key to success in this environment is a class build plan that has followed rigorously, so that every ship in the class is built in the same manner, with discipline, completion of planning packages to minimize out-of-sequence work, and a 100% quality inspection in critical areas such as pipe and electrical. The DDG swap is well aligned with these objectives and it facilitates what we are working to accomplish at the Gulf coast. "We look forward to finalize in the contractual details this year." He added.
