ULA Earnings Take Some of the Sting out of Lockheed’s Lackluster Space Returns

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PARIS — Lockheed Martin on Oct. 22 reported lower revenue and operating profit for its Space Systems division during the nine months ending Sept. 28, but a higher operating profit margin due to increased earnings from government launch services provider United Launch Alliance.

Bethesda, Maryland-based Lockheed said the 29 percent increase in ULA earnings, to $90 million from $70 million for the same nine-month period in 2013, will be followed by a drop in 2015 as Denver-based ULA performs fewer launches, and launches on lower-profit vehicles, compared with 2014.

In a conference call with investors, Lockheed Chief Financial Officer Bruce L. Tanner said ULA earnings accounted for 32 percent of Space Systems division profit for the first nine months of 2014, compared with 25 percent a year ago.

Lockheed and Chicago-based Boeing each owns 50 percent of ULA.

Tanner said Space Systems division revenue and earnings are likely to be slightly down in 2015 given that no commercial Atlas launches are expected during the year. A commercial Atlas vehicle in August launched the WorldView-3 Earth imaging satellite for DigitalGlobe of Longmont, Colorado.

Also missing in 2015 will be a flight of Lockheed’s Orion crew transport vehicle, under construction for NASA. An unmanned Orion is scheduled to make its inaugural test flight in December, another revenue event for Lockheed that will not recur in 2015, Tanner said.

For the nine months ending Sept. 28, the Space Systems division reported $5.74 billion in revenue, down 4.3 percent from the same period a year ago. Operating profit, at $783 million, was down marginally from last year, but the operating profit margin, helped by the ULA earnings, was 13.6 percent compared with 13.2 percent a year ago.

The increase in revenue from the Orion program and from the commercial Atlas launch was partly offset by lower government satellite revenue, particularly the lower business volume from the U.S. Air Force’s AEHF military communications satellites, Lockheed said.

Lockheed Martin Space Systems in recent years has not been active in the export market, but company Chief Executive Marillyn A. Hewson said during the call that Space Systems along with the rest of the company is looking abroad for opportunities given the mediocre U.S. government spending forecast.

Without being questioned about it, Hewson said Lockheed’s new space technology office in Britain is designed to strengthen ties with British government, commercial and university partners “to develop opportunities in environmental monitoring, space exploration, global security and secure space communications.”

Lockheed was part of a team that a decade ago lost a large contract to supply British military forces with satellite communications services. The contract, won by Airbus Defence and Space, expires at the end of the decade and the Skynet 5 satellites that Airbus financed and launched for the government will become government property.

The British government has made space technology a high priority and has substantially increased its spending. The budget increase has lured numerous companies from France, Italy, Canada, the United States and elsewhere to Britain to set up companies in the hope of capturing the opportunity.

Airbus Defence and Space remains by far the largest industrial recipient of British government space spending.