Saudi plane price dispute could knock earnings at BAE Systems

City A.M. Reporter
BAE Systems yesterday warned that its 2012 earnings could take a hit if it does not reach an agreement with Saudi Arabia on the pricing of a key contract in the next two months, potentially hampering growth.

The arms maker, Europe’s largest defence contractor, is hunting for growth as a standalone company after failing to complete a $45bn (£27.7bn) merger with the Franco-German maker of Airbus civilian jets, EADS, in October.

BAE said it remains in discussions with Saudi Arabia over the pricing of a contract to supply 72 Typhoon aircraft, which was signed in 2007. The Salam deal, as it is known, is worth around £4.5bn.

“Should an acceptable agreement not be reached before the group's full year results announcement, the impact on 2012 trading guidance would be to reduce the group’s underlying earnings per share by approximately 3p per share,” the company said in a statement yesterday afternoon.

BAE in August forecast that it would deliver “modest growth” for 2012 subject to agreeing the deal with Saudi Arabia, which chief executive Ian King had said he expected in the second half of the year.

The firm is thought to be close to securing a deal with Oman for 12 Eurofighter Typhoon combat jets by the end of the year.