Lockheed Martin Corp. (LMT:US), Boeing Co. (BA:US) and BAE Systems Plc (BA/) remained the top three global armsmakers even as suppliers from South Korea, Brazil and Russia made inroads in a market that contracted for a second year.
Sales of weapons and services by the 100 largest suppliers fell 4.2 percent in real terms to $395 billion in 2012 after a 6.6 percent retreat in the previous year, the Stockholm International Peace Research Institute said in a review that excludes Chinese manufacturers. Companies based in North America and western Europe accounted for 87 percent of the total, as the share for suppliers from other regions reached a new high.
Sales for the top five military contractors, including Raytheon Co. (RTN:US), which overtook General Dynamics Corp. (GD:US) for fourth place, contracted as U.S. and other western defense spending declined. All Russian companies saw sales rise, SIPRI said, after the government boosted military spending.
“The large increases seen by the Russian companies is probably the single most striking feature” of the 2012 figures, Sam Perlo-Freeman, director of military expenditure at SIPRI, said in a telephone interview. “This really shows the state armaments plan is happening to a very significant degree.”
Almaz-Antey OAO (KBAA), a maker of equipment to shoot down enemy aircraft, saw a 41 percent sales rise in 2012, making it the 14th largest arms producer, the highest ranking ever for a Russian company, SIPRI said. All Russian companies in the top 100 except United Aircraft Corp. (UNAC) recorded a rise of more than 20 percent. The slower performance of United Aircraft, maker of Sukhoi Su-30 combat jets, could be linked to the timing of orders, Perlo-Freeman said.
Embraer SA (ERJ:US), maker of regional jets for airlines and Super Tucano light attack aircraft, climbed 17 positions to 66th in the global ranking as sales rose 36 percent to $1.1 billion. The Sao Jose dos Campos, Brazil-based company, which is developing a military transport, could rise further in the ranking through industrial ties from Brazil’s planned purchase of Gripen fighters made by Sweden’s Saab AB (SAABB), which slipped five spots to become the 32nd largest armsmaker, Perlo-Freeman said.
Even with two years of declines, arms producers have benefited from a 29 percent rise in sales since 2003, SIPRI said. Spending increases were fueled by military operations in Iraq and Afghanistan and some service providers, which were among the largest beneficiaries, are now seeing sharp falls as the pace of operations slows.
KBR Inc., a Houston-based services company, saw a 60 percent drop in arms-related sales in 2012, the research organization said.
Global spending has yet to hit bottom, Perlo-Freeman said. “We will continue to see a decline because the military spending figures in the west are still coming down.”
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