Mike Stone
WASHINGTON (Reuters) – Lockheed Martin Corp (NYSE:) and RTX Corp, fresh from a surge in orders in response to Russian aggression against Ukraine and the war in the Gaza Strip, will benefit from $95 billion in mostly new weapons financing as increasingly protracted conflicts revive demand for expensive equipment. .
President Joe Biden signed a hard-fought bill Wednesday that provides billions of dollars in new U.S. aid to Ukraine for its war with Russia, including $61 billion for Ukraine and $26 billion for Israel.
“We’re seeing plants being built all over the country right now” because of the new funding and several recent rounds of “incremental” funding, Pentagon acquisition chief Bill LaPlante said Wednesday.
In the battles in Ukraine and Israel, large quantities of ammunition were used, including Patriot air defense interceptors, which were used to shoot down Russian missiles, as well as huge quantities of 155-millimeter artillery shells.
The new funds will be used to pay for new deliveries and replenishment of supplies in the United States. European allies are also lining up to buy American weapons because of the war in Ukraine and a desire to strengthen NATO.
The United States needs to procure and resupply Tomahawks, AMRAAMs, Coyotes, SM-6s,” RTX Chief Financial Officer Neil Mitchill told Reuters in an interview, listing a long-range cruise missile, an air-to-air missile, a small drone and a land-based missile. basing, which can be used for air defense. In most cases, the US either sent munitions to Ukraine or used them to protect shipping lanes in the Red Sea.
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Lockheed CEO Jim Taiclet told investors on Tuesday that he expects “the President’s fiscal year 2025 budget requests and additional additional funding will provide a strong foundation for our company’s future growth over the next several years.”
However, given the uncertainty about when funding will flow to defense companies, neither Lockheed nor RTX, formerly Raytheon Technologies (NYSE:), raised their 2024 sales forecasts.
“I don’t expect sales to be any faster,” RTX’s Mitchill said, adding that he thinks contracting could “accelerate a little bit” this time. Negotiating a defense contract is a slow and legally complex process.
“The bottom line is, as you know, we have a lot of orders. Our portfolio of defense orders totals $77 billion. So it will take some time to fulfill these deliveries,” Mitchill said.
RTX creates the Patriot surface-to-air missile defense system, which means a phased array tracking radar for target interception.
Lockheed makes the newest version of the interceptors that powers the Patriot, known as the PAC-3 MSE, each of which costs about $4 million, according to Army budget documents.
In January, European countries banded together to buy up to 1,000 Patriot interceptors. European production of the Patriot interceptor variant called Guidance Enhanced Missiles, or GEM-T, under this order will likely be carried out by COMLOG, a joint venture between RTX and MBDA, whose current production capacity is limited.
But Patriot is just one of the systems where investment is needed to expand production capacity before big revenues start flowing.
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Of the additional $95 billion, more than $17 billion is earmarked for investment in expanding the manufacturing capacity of the U.S. defense industrial base, including the production of 155mm projectiles and $3.3 billion for shipyards.