BAE Taking Steps to Mitigate Effect of Germany Restricting Arms Export to Saudis

   By Robert Wall 
 

U.K. weapons maker BAE Systems PLC (BA.LN) is taking steps to shield its sales from being hit by Germany's restrictions on arms exports to Saudi Arabia, Chief Executive Charles Woodburn said Thursday.

Germany blocked some arms exports to Saudi Arabia following the killing of journalist Jamal Khashoggi last year.

The restrictions could impact BAE Systems' ability to repair Saudi Arabia's fleet of Eurofighter Typhoon combat jets. The twin-engine combat plane used in Saudi Arabia's military operations in Yemen is made by a joint venture involving BAE, the German and Spanish arms of Airbus SE (AIR.FR), and Italy's Leonardo SpA (LDO.MI), giving the German government some say over parts sales.

The "current German government position on export licensing may affect the group's ability to provide capability to Saudi Arabia which may have a consequential impact on the Group's financial performance and relationships," BAE said in a statement.

Mr. Woodburn said the company is "working on a number of mitigation" plans, including unspecified supply-chain actions. The situation is not a "cliff-edge" scenario, he said, and impacts so far are minimal. Still, he warned that over time the situation "could become more difficult."

BAE said it is also working with the U.K. government to resolve the issue.

The company in March last year finalized an agreement to sell Saudi Arabia another batch of 48 Typhoons and Mr. Woodburn said Thursday that contract talks to complete the transaction continue.

Earlier in the day BAE reported a 14% rise in 2018 pretax profit, and said it expects underlying earnings per share for 2019 to grow by a mid-single-digit percentage.

Shares in the weapons maker fell 3.3% after the 2018 earnings and were last down 5.8% at 475 pence.

Write to Robert Wall at [e-mail]

(END) Dow Jones Newswires

February 21, 2019 05:07 ET (10:07 GMT)

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