Supply chain disruptions drive revenue declines for Lockheed Martin and RTX

As the world’s largest arms producer, Lockheed Martin reported revenues of USD 60.8 billion in 2023, a 1.6 per cent decline compared to 2022. This marked the third consecutive year of falling revenues for the company, despite higher demand for its aeronautics and missile systems. The company faced significant supply chain issues, particularly in securing solid-fuelled rocket motors, a critical component for missile production. These delays affected Lockheed Martin’s ability to ramp up production to meet increased orders, especially in high-demand areas such as missile defence and aerospace.

The mismatch between demand and production was evident in the company’s backlogs. Backlog growth in segments such as Missiles and Fire Control Systems (+12 per cent), Aeronautics (+6.2 per cent), and Rotary and Mission Systems (+7.9 per cent) outpaced revenue growth in these areas. For instance, revenues in the Missiles and Fire Control segment fell by 0.6 per cent, while backlog growth soared, indicating delayed production. The Space segment was a notable exception, with revenue growth of 9.3 per cent exceeding backlog increases of 2.6 per cent, reflecting successful delivery in that area.

RTX, formerly Raytheon Technologies, faced similar challenges in 2023, with revenues declining by 1.3 per cent to USD 40.7 billion. The company struggled to meet demand for its missile and aerospace systems, particularly in export markets, where revenues fell by 5.4 per cent. Supply chain disruptions, including delays in critical components for missile systems, severely hampered RTX’s ability to deliver products on schedule.

Domestically, RTX managed to increase revenues slightly by 0.2 per cent, reflecting stronger performance in fulfilling US defence contracts. Despite this, the overall decline in revenues highlighted the company’s struggles with production constraints. The rebranding to RTX in 2023 did little to offset operational hurdles, as the company navigated a complex global environment characterised by heightened geopolitical tensions and escalating demand for advanced military systems.

In contrast to its peers, Northrop Grumman delivered robust growth in 2023, with revenues rising by 5.8 per cent to USD 35.6 billion. The company appeared less affected by supply chain disruptions, allowing it to capitalise on growing global demand for ammunition and advanced defence technologies.

Northrop Grumman benefited from increased orders linked to the conflict in Ukraine, as well as the US government’s strategic focus on modernising its missile defence and nuclear weapon delivery systems. The company’s Space Systems segment was a standout performer, achieving 9.2 per cent year-on-year revenue growth, the highest among its divisions. This growth was driven by demand for a new space-based early warning missile defence system, positioning Northrop Grumman as a key player in the evolving defence landscape.

Source: THE SIPRI TOP 100 ARMS-PRODUCING AND MILITARY SERVICES COMPANIES, 2023.