2018 Global aerospace and defense industry financial performance study

Analysis

2018 Global aerospace and defense industry financial performance study

Commercial aerospace sector performance decelerates, while defense sector continues to expand

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The Global aerospace and defense (A&D) industry recuperated as revenue grew in 2017. However, growth was slower than the estimated gross domestic product (GDP) of 3.1 percent in 2017.

The global defense sector had revenues up by 3.9 percent and led the overall industry growth. Heightened global security threats, increasing US defense budgets, and higher defense spending by countries such as India, China, and Japan spurred this growth. In contrast, the global commercial aerospace sector growth slowed by 1.5 percent partly due to a decline in twin-aisle aircraft deliveries in the US. However, backlogs of commercial aerospace continued to remain at an all-time high of 14,215 aircrafts.

This 2018 study reviews the financial performance of the top 100 global A&D companies or those units of industrial conglomerates with A&D businesses that reported revenues of more than US$500 million in 2017. The companies were evaluated based on 19 key financial metrics. The report also draws a comparative analysis of the commercial aerospace and the defense sectors across major markets in the US and Europe.


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2017 global A&D industry performance

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Revenue

2.7 percent

Revenue

2017:US$685.6 billion
2016: US$667.3 billion

Core operating earnings

9.1 percent

Core operating earnings

2017: US$74.2 billion
2016: US$68.1 billion

Core operating margin

6.2 percent

Core operating margin

2017: 10.8 percent
2016: 10.2 percent

Return on assets (ROA)

15.6 percent

Return on assets (ROA)

2017: 5.2 percent
2016: 4.5 percent

Free cash flow (FCF)

26.2 percent

Free cash flow (FCF)

2017: US$51.3 billion
2016: US$40.7 billion

FCF margin

22.8 percent

FCF margin

2017: 7.5 percent
2016: 6.1 percent

Book-to-bill ratio (BTB)

20.0 percent

Book-to-bill ratio (BTB)

2017: 0.95 times
2016: 1.19 times

Number of employees

0.01 million

Number of employees

2017: 1.93 million
2016: 1.92 million

Employee productivity

8.6 percent

Employee productivity

2017: US$38,543
2016: US$35,475

Note: The percentage increase or decrease numbers are as compared to 2016.

Key findings:

  • Global A&D industry revenues grew 2.7 percent or US$18.3 billion in 2017 to reach US$685.6 billion.
  • Global defense sector revenues recorded a 3.9 percent increase as defense spending continues to rise across the globe.
  • The commercial aerospace sector’s revenue growth dropped from 2.7 percent in 2016 to 1.2 percent in 2017.
  • The US A&D industry outperformed its European counterparts, led by a robust performance of the US defense sector.
  • Original equipment manufacturers (OEMs) and companies in the electronics segment drove overall revenue growth.
  • The industry’s core operating margins improved in 2017, primarily led by the US.
  • The operating margins for the propulsion segment were mostly flat in 2017 at 17.4 percent but were the highest amongst all segments.
  • The A&D industry productivity continued to improve, up by a solid 8.6 percent in 2017.
  • Employment in the industry was 1.93 million in 2017, marginally up compared to the previous year but the number of companies increasing their headcounts in 2017 was down.

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