UK's Chemring posts record order book on geopolitical risks

(Reuters) -British defence contractor Chemring posted its highest-ever order book and order intake on Tuesday for the six months ended April 30, driven by rising global defence spending amid heightened geopolitical tensions.

The company, which also reported a half-year profit growth and reaffirmed its full-year expectations, said it anticipates steady demand for its air and naval products over the next decade.

CONTEXT

Chemring manufactures equipment such as sensors and countermeasures for naval and battlefield systems, among others.

Demand for the company's specialised energetics capabilities - high-performance explosive materials and devices - has remained strong since Russia's invasion of Ukraine in 2022.

WHY IT'S IMPORTANT

The Ukraine-Russia war has driven a surge in demand for munitions and military technology, prompting governments to expand contracts with defence products suppliers.

More recently, the British government pledged the largest sustained increase in defence spending since the end of the Cold War, expanding its fleet of attack submarines, which are nuclear-powered but carry conventional weapons.

KEY QUOTE

"With growing geopolitical uncertainty resulting in increased defence expenditure, particularly across NATO, the group is well positioned with a strong and sustainable platform to increase revenue to 1 billion pounds ($1.35 billion) by 2030", CEO Michael Ord said in a statement.

BY THE NUMBERS

The company reported an underlying operating profit of 27.1 million pounds for the six months ended April 30, growing 8% from the prior year, and said its order book totalled 1.30 billion pounds, a 25% increase.

It reaffirmed its expectations for the year ending October 31. Analysts, on average, estimate 75.5 million pounds in underlying operating profit, according to a company-provided consensus.

MARKET REACTION

Shares in the Romsey-based company rose as much as 3.6% to 504 pence during morning trade, their highest level since July 2011.

($1 = 0.7393 pounds)

(Reporting by DhanushVignesh Babu in Bengaluru)