PARIS — Lockheed Martin on July 24 raised its forecast for 2012 revenue and profit at its Space Systems division, saying the transition of several military satellite programs from development to production status will offset a decline in other areas of the business.
In addition, the company said its two 50-percent-owned joint ventures — launch services provider United Launch Alliance and NASA services provider United Space Alliance (USA) — would generate more profit in the second half despite the fact that USA is closing down as a delayed consequence of the retirement of the U.S. space shuttle.
Houston-based USA’s closure in the third quarter will result in a one-time spike in equity earnings distributions from the company. Bethesda, Md.-based Lockheed and Chicago-based Boeing each own 50 percent of USA.
“With the closeout of USA we actually expect an additional improvement” in the second half of this year, Lockheed Martin Chief Financial Officer Bruce L. Tanner said in a July 24 conference call with financial analysts. “We lose that spike in 2013 and beyond.”
Lockheed Martin Space Systems is expected to report an operating profit of $925 million to $950 million on revenue of $7.75 billion to $8 billion in 2012, the company said. Both estimates are above the previous forecast in April.
For the first half of the year, a big contributor to Space Systems revenue was the successful delivery of two commercial telecommunications satellites, the JCSat-13 spacecraft for Sky Perfect JSat Corp. of Japan and the VinaSat-2 satellite for the Vietnam Post and Telecommunications Co.
Lockheed Martin booked a combined $285 million in revenue for the two spacecraft following their delivery.
Lockheed’s work on NASA’s Orion Multi-Purpose Crew Vehicle achieved a milestone in the six months ending June 30 that allowed the company to retire program risks and increase revenue by about $130 million compared with the same period a year ago.
Space Systems includes Lockheed Martin’s work on strategic and defensive missiles, a business line whose revenue increased by $50 million in the first six months of 2012 following increased production volume.
Of far greater import to Lockheed Martin’s financial statements is the company’s work on several multibillion-dollar satellite systems for the U.S. Defense Department. As these programs complete their design and development phase and move toward regular production, Lockheed Martin expects risks to drop and profitability to increase.
Tanner cited the company’s work on the U.S. Navy’s Mobile User Objective System (MUOS), a constellation to deliver low-rate communications capability to U.S. forces through a series of satellites; and the Space Based Infrared System (SBIRS) missile warning satellites for the U.S. Air Force.
“We’re getting … into the sweet spot of production vehicles for all these,” Tanner said, referring to SBIRS and MUOS. “We’re doing well on … the production coming out of the development. The margin improvements associated with that are helping to mitigate” the loss of USA equity earnings starting in 2013.
Lockheed Martin recently reorganized its Space Systems division, led by Joanne M. Maguire, in an attempt to streamline the organization, Lockheed Chief Operating Officer Christopher E. Kubasik said during the conference call.
The result, Kubasik said, is that the seven or eight lines of business reporting to Maguire have been reduced to four or five “to reduce the infrastructure to support the business.”
