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(Reuters) – U.S. weapons maker Northrop Grumman Corp reported a fall in first-quarter sales and adjusted profit on Thursday, hit by labor shortages and supply chain issues.
An acute labor shortage due to the Omicron-led surge in coronavirus infections led to demand for workers far outpacing supply.
Northrop Grumman Corporation (NYSE:NOC) Chief Finiancial Officer David Keffer told Reuters on Thursday, “We experienced COVID-related labor and supply chain pressures in January, in particular through the height of the Omicron spread. Those pressures alleviated in February and March. In fact, in March, we saw a strong recovery.”
The company reported a 9.6% decline in revenue from its aeronautics unit, which makes the center fuselage for fighter jets.
However, Russia’s invasion of Ukraine in February has boosted defense spending demand in the U.S. as well as other countries as they shore up their defenses.
“An area that we see the likelihood of increased demand is across Europe, not just Eastern but Western Europe as well, in air and missile defense,” Keffer said.
U.S. President Joe Biden’s $5.79 trillion budget plan to Congress submitted last month includes calls for record peacetime military spending of $813 billion, up from $778 billion last year.
The company maintained its 2022 forecast, signaling sustained demand for its products aided by rising geopolitical tensions, with projected sales of between $36.20 billion and $36.60 billion.
It continues to expect full-year adjusted earnings per share of between $24.50 to $25.10.
Sales in Northrop’s space systems business gained 13.2% to $2.86 billion, its third consecutive quarterly rise.
The company’s sale of its IT services in early 2021 also led to lower sales and profit in the first quarter, the company added.
Quarterly adjusted net earnings fell to $955 million, or $6.10 per share, from about $1.08 billion, or $6.57 per share, a year ago.
The company’s total sales fell to $8.80 billion in the first quarter, from $9.16 billion a year earlier.
