BAE Systems wins £512m US Army contract

DEFENCE firm BAE Systems has been awarded a $780m (£512m) contract from the US Army, a boost after a difficult year in which the company failed to meet its earnings target.

As part of the five-year contract, Europe’s largest defence contractor received an initial $18.4m to finance production of munitions, according to a company statement on Friday.

The deal comes hot on the heels of BAE’s annual report last week, which showed the salaries of three executives including chief executive Ian King were frozen following lacklustre results.

In February the firm posted a decrease in full-year underlying earnings before interest, tax and amortisation to £1.9bn, hurt by unresolved discussions over pricing of the Saudi Arabian contract to supply the Gulf state with Typhoon aircraft.

BAE has been impacted by budget cuts in the US over the past year, which led to contracts being delayed or cancelled. Discussions with Saudi Arabia over the pricing of a contract to build 48 Typhoon aircraft also failed to be resolved.

In its annual report, BAE predicted “modest growth” in its underlying earnings per share for 2013 due to “near-term uncertainties relating to US defence budgets”.

BAE’s market capitalisation was £13.77bn at market close on Friday. The defence firm has held the operating contract of the US Army’s Holston Army Ammunition Plant in Tennessee since 1999, developing a wide range of explosive formulations for military and commercial use.