Lockheed Martin space sales growth lags

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WASHINGTON — Lockheed Martin recorded record sales in 2017, but growth in the company’s space division was far smaller than in its other sectors.

The company, in financial results released Jan. 29, reported a consolidated operating profit of $5.9 billion for 2017 on net sales of $51 billion. Both were up from 2016, when the company has an operating profit of $5.5 billion on net sales of $47.2 billion.

While all four of the company’s business sectors – aeronautics, missiles and fire control, rotary and mission systems, and space – reported sales growth in 2017, the space division’s growth was well behind the other three. The company said its space division had net sales of $9.47 billion, an increase of less than one percent over 2016. The other sectors reported growth of between 5.5 and 13 percent.

Space was also the one sector to report a significant decline in operating profit. The sector had an operating profit of $993 million in 2017, down 23 percent from 2016. The aeronautics and missile and fire control sectors both reported increases in operating profit in 2017 while the rotary and mission systems sector was effectively unchanged from 2016.

The small increase in space sales at Lockheed Martin is due to its stake in AWE Management Ltd., a joint venture that operates British nuclear deterrent program and, after a reorganization in August 2016, was placed in the company’s space segment. The full year of net sales in AWE offset declines in space transportation, government satellite and other programs.

The decline in operating profit for the space segment was due in part to a one-time pre-tax gain in 2016 from the AWE Management Ltd. reorganization. The rest of the decrease was linked to declines in space transportation and government satellite work, as well as $25 million in charges “for performance matters on certain commercial satellite programs.”

The company also recorded a decrease in equity earnings that primarily come from its 50 percent stake in United Launch Alliance. Lockheed Martin said it recorded $205 million in equity earnings in 2017, compared to $325 million in 2016. ULA performed eight launches in 2017, versus 12 in 2016.

In a conference call with financial analysts Jan. 29, Lockheed Martin executives did not dwell on the performance of the space sector, mentioning only in passing the delivery and successful launch of the fourth Space-Based Infrared System (SBIRS) satellite, built by Lockheed Martin.

The company did use the call to discuss how it planned to take advantage of tax reform enacted last year that reduces corporate tax rates. “This will enable us and, just as importantly, many of our supply chain partners, to invest in transformative technologies and make decisions that we anticipate will enhance our competitive position in the 21st century,” Marillyn Hewson, Lockheed Martin president and chief executive, said in the call.

Among those decisions will be increased funding in the company’s investment arm, Lockheed Martin Ventures, “whose charter is to make strategic investments in early-stage companies that are developing disruptive, cutting-edge technologies in core businesses and new areas that are important to Lockheed Martin,” she said. That investment, as well as other research and development and capital investments, will grow by $200 million in 2018.

Among the investments made by Lockheed Martin Ventures is in Rocket Lab, the U.S.-New Zealand company that has developed the Electron small launch vehicle. “We need low-cost access to space and high potential frequency of access, which would open different mission types, and we knew that the U.S. government was pushing us to have that kind of access,” said Chris Moran, general manager of Lockheed Martin Ventures, during a Jan. 23 panel discussion at the Space Tech Summit in San Mateo, California.

Another investment by Lockheed Martin Ventures is in Terran Orbital, a small satellite developer. “That’s been a great relationship for us,” Moran said. Lockheed Martin has added Terran Orbital’s nanosatellite bus to its product line and has already submitted nine proposals to government agencies using that hardware, representing up to $100 million in business, some of which Moran said had already been accepted. “That’s the kind of ideal collaboration that we hope to make with the venture group.”