BAE sees modest earnings growth, U.S. remains uncertain

LONDON Wed May 8, 2013 2:56am EDT

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LONDON May 8 (Reuters) - BAE Systems left its outlook for the year unchanged and forecast "modest growth" in earnings per share for 2013, subject to continued uncertainties over defence budget cuts in the United States.

Europe's largest defence contractor said on Wednesday that its forecast excluded the benefit from the share buyback programme launched in February and did not include a potential 3 pence per share earnings uplift should the company conclude pricing talks with Saudi Arabia on a fighter jet contract.

"BAE Systems has continued to perform in line with management expectations announced at the preliminary results in February," Chief Executive Ian King said.

"We continue to pursue growth in our international markets and have built on the strong international order intake in 2012 with a further 2.3 billion pounds of non-UK/US orders received in the year to date, reflecting the strength of our broad based and diverse business."

BAE is searching for new avenues of growth after the collapse of its $45 billion merger with Franco-German aerospace group EADS and has focused on markets such as the Middle East.

It said that its 2013 forecast does not reflect the impact of US defence spending cuts because it does not have sufficient detail.

Across-the-board U.S. government cuts, known as sequestration, began in March and will force the Pentagon to reduce its proposed spending for this year by a further $42 billion.

BAE also said that completion of its 1 billion pound ($1.6 billion) share buyback programme hinges on the completion of the Saudi talks.

The contract, known as the Salam deal, was first signed with Saudi Arabia in 2007 but has been delayed by the talks on pricing. BAE has already sent 24 of the 72 Typhoon aircraft ordered to the Royal Saudi Air Force and deliveries started again in April, it said.

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