Aerospace & Defence Biannual Newsletter — June 2013

View this page in: Français

In this issue:

Editorial Overview | Mission Control: First quarter 2013 global aerospace and defense industry mergers and acquisitions analysis | Aerospace & Defense 2012 year in review and 2013 forecast | Gaining Altitude | Webinaire Strategies for a Changing Defense Landscape | Webinaire Aviation Week Top-Performing Companies’ Results

Editorial Overview

There is only a few days left before the 50th Paris International Airshow, an event that promises to be exciting. The past six months have been quite busy for the Canadian Aerospace sector with the launch of the report from the Aerospace Review in November 2012 which highlights the initiatives announced by the federal government such as the creation of an aerospace technology demonstrator program. In 2012, the aerospace and defense industry reported its best year ever in terms of revenue and profit. The strength of a surging commercial aviation market more than offset a soft defense performance. For 2012, the top 100 A&D companies reported a record setting $695 billion in revenue and $59.8 billion in operating profit. Revenue was up 4 percent compared with 2011, while operating profit was up 2% over 2011. These data have been pulled from our Aerospace & Defense 2012 year in review and 2013 forecast, for which you will find a link below.

We see the same trends continuing for the A&D industry for 2013 and beyond as the overall forecast for the aerospace industry mirrors global economic trends, with modest growth this year and next. Although profits will improve significantly each year of the forecast, they are not expected to reach their previous peak within the next five years. Supply chains will continue to evolve with OEMs continuing to narrow their number of suppliers, ramping up production and looking to reduce costs by moving production to low-cost countries. Reduction in military spending of governments will also be something to monitor with companies specialized in military activities currently looking to diversify their offering. All these factors along with the current relatively low cost of money should continue to be a catalyst for a strong merger and acquisition activities (M&A) in the sector.

With the expected maiden flight of the Bombardier C-Series and the Airshow, the stage is set for a busy month of June. We look forward to seeing you at the Airshow.

Regards,

Mario Longpré, CA, CPA
PwC | Partner, Canadian Aerospace & Defence Leader
T : +1 514 205 5065

Mission Control: First quarter 2013 global aerospace and defense industry mergers and acquisitions analysis

During the first quarter of 2013, the volume of M&A in the A&D sector continued to be dampened by US sequestration and related defense budget uncertainty, which could slow deals throughout the rest of the year. M&A in the A&D sector may remain weak through the end of 2013, but activity could accelerate in 2014.

Aerospace & Defense 2012 year in review and 2013 forecast

Aerospace and defense industry delivers a third consecutive year of record results in terms of revenues and profits. The uptick came on the strength of a surging commercial aviation market that more than offset a soft defense performance. For 2012, the top 100 A&D companies reported a record-setting $695 billion in revenue and $59.8 billion in operating profit. Revenue was up 4 percent compared with 2011, while operating profit was up 2% over 2011. Although growth is expected to slow, commercial aerospace companies continue to be optimistic about the future. However, defense companies face an uncertain 2013. Among other challenges that lie ahead, sequestration went into effect on March 1, 2013, and defense companies are now bracing for the consequences and waiting for details regarding the impact on specific programs.

Gaining Altitude

In the Gaining Altitude series, we share insights that we gained from working with clients, customers and suppliers in the ever-changing dynamics of the global value chain for aerospace and defense. Our insights cover all aspects of the program life cycle: program strategy, bid and proposal, design, engineering and planning, field sustainment, program delivery, IT effectiveness and cross phase processes.

Below is a list of the published issues.

Webinaire Strategies for a Changing Defense Landscape — May 16, 2013

Aviation Week and PwC hosted a webinar and which demonstrated how the industry is adopting strategies to face the changing defense landscape, which has been affected by cuts in budget spending.

Webinaire Aviation Week Top-Performing Companies’ Results

Commercial leads; Defense Revenues Stall While Profits Hold — May 30, 2013
Aviation Week and PwC hosted a webinar which demonstrated how the industry’s diverging fortunes, a booming civil aviation sector and a defense sector that is feeling the pinch of budget cuts have reshaped the ranking of A&D companies worldwide. Our participants looked at highlights in this year’s ranking and discussed where the industry is heading based on findings in the annual TPC study.