Huntington Ingalls penalized by rising costs in Q1
American military shipbuilder Huntington Ingalls saw its profitability decline in Q1, amid a backdrop of inflation and global trade disruptions. Despite robust US demand for submarines and aircraft carriers, rising costs weighed on performance. In response to these results, the group's shares fell over 10% during trading. However, geopolitical tensions and China's naval buildup continue to support demand prospects.
US trade measures, including tariffs targeting several partners, have heightened market uncertainty and weakened supply chains. These factors contributed to rising costs across the defense sector. The Newport News shipbuilding division recorded a 19.3% increase in sales, reaching $1.67bn. However, its operating margin contracted by 80bp to 5.3%.
At the group level, the operating margin stood at 5%, compared to 5.9% a year earlier. EPS remained stable at $3.79, while total revenue reached $3.1bn, slightly above the $3.02bn expected according to LSEG. The cost of sales rose sharply by 20% to $1.74bn. This increase reflects the direct impact of inflationary pressures on operating expenses.
Huntington Ingalls Industries, Inc. is one of the leading American naval military construction groups. Net sales break down by activity as follows:
- design and construction of nuclear powered ships (51.5%): aircraft carriers and submarines. The group also offers resupply services, ship servicing and decommissioning, as well as naval nuclear assistance, maintenance and upkeep services, and nuclear reactor prototypes;
- design and construction of non-nuclear ships (24.4%): amphibious assault vessels, supply ships, surface combat ships and national security interception ships for the American navy and coastguard;
- technical services (24.1%): naval architecture and marine engineering services, integrated logistical support services, cyber security services, development of technical documentation, development and prototyping of underwater vehicles, specialized boats, etc.
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