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Defense Industry Stabilized in 2010

by Asif Anwar | 2月 14, 2011

As the financial crisis hit home, defense departments have also had to take a long hard look at expenditure. The impact of these decisions started to hit the defense industry in 2009, with revenues and associated profitability dropping for the first time in seven years. However, analysis from the Strategy Analytics Advanced Defense Systems (ADS) service report, Defense Industry Profitability Gains in 2010 shows that defense industry performance stabilized in 2010.

Strategy Analytics analysis of twenty companies shows revenues increased year-on-year by 1% in 2010 to reach over $458 billion, arresting a downward spiral though not enough to reverse the losses suffered in 2009. However, profitability improved considerably with year-on-year profits increasing as companies took steps to address the impact of defense budget constraints.

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2009 marked the first time that defense industry revenues had dropped in around seven years. However, the industry did manage to stay in the black, even as year-on-year profits dropped by over 49%.

While revenues losses were not reversed in 2010, companies in general managed to arrest the downward spiral and more positively, profit margins returned to more traditional levels as year-on-year profits increased by 59%.

Challenges remain for the industry in 2011, compounded by political inaction. Nevertheless, while we don't expect anything spectacular in terms of growth, we believe the industry will retain an upwards growth trajectory this year.

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