BAE whacked by Typhoon delay

BAE banks on Eurofighter and U.S expansion for growth

LONDON, England (CNN) -- BAE Systems dived more than 10 percent after Europe's biggest defence company posted an unexpected loss associated with a delay in delivering jet fighters.

Its stock fell 12 percent to 239 pence, before recovering slightly to 245.5 pence in mid-morning London trading on Thursday. The company said it made a net loss of £63 million ($98 million) in the first six months of this year, after posting a net income of £23 million a year earlier.

Britain's BAE (BA), the Pentagon's sixth-biggest contractor, is still looking across the Atlantic to expand its business as the U.S. government increases its defence spending following the September 11 terror attacks. The company failed to buy TRW of the U.S. to increase its presence in the space electronics business but BAE said it was still looking for opportunities in the U.S.

U.S. President George W. Bush has proposed a $379 billion defence budget for the coming fiscal year, while Britain has agreed to the biggest real increase in defence spending for two decades -- $3.5 billion over three years.

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BAE made a loss on a number of projects, including the delay in the Nimrod surveillance plane and the Typhoon, or Eurofighter, project. The company has started production and expects to deliver the first Typhoon warplane to the British government by the end of the year.

Delivery is about six months behind schedule. The Nimrod should have been delivered in 2003 but that has been pushed back to 2005.

BAE, which is also partnering with Lockheed Martin on the Joint Strike Fighter, has been troubled by an 18-month delay on the delivery of three submarines. Profit before one-time items at its International Partnerships division, including fighters and missiles, slid 94 percent to £3 million.

Its avionics business, which makes aircraft electronics, like Radar sets and defensive aids for the Eurofighter, made a profit of £4 million, down 90 percent on the same period a year earlier.

BAE's commercial aerospace business, which makes the wings for Airbus, saw profit rise 6 percent to £124 million.

BAE, which owns 20 percent of aircraft maker Airbus (PEAD), said in February the downturn in civil aviation would delay the resumption of growth until 2003. In Thursday's results statement, BAE said it expected Airbus to deliver a similar number of planes in 2003 as this year.

The company said it had pretax profit of £359 million before exceptionals and goodwill amortisation, down from £482 million, as sales fell 9.4 percent to £5.7 billion.

BAE's Chief Executive Mike Turner told Reuters the company was on track for a return to profit growth in 2003.

"We are still planning profit growth in 2003," he said.