RESTON, Virginia: Amidst labor and supply shortages, US defense contractor General Dynamics forecasted weak 2023 results, though strong demand for weapons enabled it to surpass quarterly estimates.
On an investor call, company executives said that an "abnormally high retirement" of workers has negatively affected General Dynamics' electric boat unit, which assembles nuclear-powered submarines.
It was working with the US Navy to limit the effects of labor shortages, which stifled the defense industry in 2022, the company added.
"We think the challenge here is the production ramp at Electric Boat," said J.P. Morgan analyst Seth Seifman, as quoted by Reuters.
According to Refinitiv data, in 2023 the company predicted revenue of between $41.2 billion and $41.3 billion, below forecasts of $41.98 billion, as well as a profit between $12.6 and $12.65 per share, compared to estimates of $13.91.
Meanwhile, rival Lockheed Martin also forecasted lower than expected annual profits, due to supply bottlenecks and higher costs, while General Dynamics' unit that makes Gulfstream jets reported a 4 percent decline in fourth-quarter revenue.
However, a strong performance in its combat systems unit that makes Abrams tanks and other land warfare systems has offset the negative effects.
American defense contractors have benefited from increased defense spending by the US and its allies and their support for Ukraine with billions of dollars in military aid following Russia's invasion.
"We are seeing demand signals resulting from the war in Ukraine, but we have only just begun to see that manifest in our backlog," noted General Dynamics Chief Executive Phebe Novakovic, as reported by Reuters.