Lockheed Martin, Raytheon say supply chain issues hampered production

The conflict in Ukraine and China's military expansion have hampered efforts to deliver record weapons orders, as well as continuing supply chain challenges, according to the two largest U.S. defense contractors.

Lockheed Martin Corp. said worker shortages have hampered production, while the Pentagon has sped up purchases of weapons headed to Ukraine. Raytheon Technologies Corp. said it would be the end of the year before production of some materials returns to pre-pandemic levels.

The two companies have been the biggest beneficiaries of $27 billion in military equipment committed by the U.S. to Ukraine in terms of contracts awarded, though so far only $6.6 billion is under contract to industry.

The shortage of labor and components such as chips and rocket motors, as well as the need for more certainty that orders will follow if companies invest more to boost capacity, have been cited by executives.

Defense sales at both companies fell last year compared to 2021, according to quarterly results released Tuesday.

Raytheon Chief Executive Greg Hayes said on an investor call that they had got the orders, they ve got the capacity. We just need to bring the materials in. Jay Malave, Lockheed Martin's chief financial officer, said contracts were being awarded at a faster rate. The DOD has accelerated their speed to get where they want to be, he said.

Lockheed Martin, which makes F-35 combat jets, said that it would take two years to double production of Javelin antitank missiles, co-produced with Raytheon and Himars rocket launchers, both of which are widely used by Ukraine in its conflict with Russia.

In the final quarter of last year, suppliers stepped up to a faster production speed, which helped boost Lockheed Martin's quarterly sales to $19 billion, about 3% higher than the company s internal planning, according to Malave.

He said that the whole value chain was able to operate at a higher level, even though metrics such as on-time deliveries didn't improve much in the fourth quarter and labor shortages continue to pinch production.

Lockheed Martin reported a net profit of $1.91 billion for the quarter ended December 31, compared to $2.05 billion a year earlier. The per-share profit dropped to $7.40 from $7.47, just short of the consensus forecast of analysts polled by FactSet. In 2022, it had an order backlog of $150 billion.

Lockheed Martin left its guidance for flat sales in 2023 unchanged, forecasting a return to growth in 2024 when the supply chain improves.

Raytheon reported a net profit of $1.4 billion for the quarter ended December 31 compared to $685 million a year earlier. The sales of the company's parts increased by almost 6% and the per share profit rose to 96 cents from 46 cents in the quarter to $18.1 billion, lifted by commercial aerospace engines and parts.