BAE Systems shares fell on Thursday after it admitted a German freeze on Saudi arms exports in response to the murder of journalist Jamal Khashoggi could hammer its supplies to the kingdom.
The FTSE 100 firm, which gets less than 15% of group sales from Saudi, said there were several planning and supply chain projects to cut disruption from the ban. Germany said in November it would halt arms export licences to Saudi following outrage over Khashoggi, who was slain in the Saudi Arabian embassy in Turkey in October.
BAE has Saudi contracts for Eurofighter Typhoon and Tornado fighter jets using parts affected by the German ban, prompting fears shipments could be hit.
Chief executive Charles Woodburn said: “This is not a cliff-edge scenario. The impact has been minimal to date but over time it could become more difficult.” He did not give details on how it was trying to cut disruption because the information is classified.
BAE was less forthright about the problems than French plane maker Airbus’s chief executive Tom Enders, who has said Germany’s ban was “a kind of moral high ground attitude”.
Woodburn said: “The operations of Saudi Arabia are conducted under a government-to-government agreement where we are the prime contractor.
“The issue of German licences is a political issue and as such requires it to be resolved at a political level. To that end we are working closely with the UK government.”
BAE said order intake increased by £8 billion to £28.3 billion. Its defence order backlog was at a record high with “high visibility” on key initiatives over the next decade. Shares fell 7% to 471p.
The company has appointed a chief technology officer in a bid to keep BAE innovating.
Woodburn promised higher spending on technology through self-funded ventures and more M&A activity.
