WASHINGTON (Reuters) - Mike Petters, chief executive of Huntington Ingalls Industries Inc (HII.N), on Wednesday said he remained committed to a longer-term view of the U.S. shipbuilder’s business prospects, despite growing market pressures to focus on short-term gains.
Petters told the Washington-based Atlantic Council think tank that this longer-term focus had driven his company to invest in potential new business areas in the energy sector, and the creation of on-site health centers at its facilities.
He said the company was striving to balance demands from shareholders for dividend increases and share buybacks in a market driven by high-frequency trading, with longer-term investment needs and plans for a company that builds ships that will be in use by the U.S. Navy until the 2070s.
Investments aimed at organic growth would pay greater dividends in the long run, but they would not necessarily add to the perceptions that drive up share prices, he said.
“You can buy back shares, raise your dividend, you can do lots of stuff that will actually affect the perceived value of your company, but they’re not investments that are creating new value inside your business,” Petters said. “That’s an environment that we’re all struggling with now.”
Petters cited what he called the “institutionalization of the short-term,” noting that tight budgets would also likely increase pressure from government officials for companies to do more work for less award fees, and to scale back profit margins.
The comments from Petters, a former naval officer, amid increasing calls by U.S. officials for U.S. weapons makers to pump up internal spending on research and development - rather than big stock buybacks - to ensure the U.S. military stays ahead of China and other potential foes.
Petters told Reuters last week that mandatory across-the-board budget cuts had also dampened companies’ willingness to invest in research and development programs, since they were uncertain if that spending would pay off in the longer-run.
For video of Petters interview see: [reut.rs/1FKazcz]
Huntington Ingalls’ shares fell just over 3 percent, or $3.50, to close at $104.21 on the New York Stock Exchange on Wednesday, while the Dow Jones Defense Index .DJUSDN dropped about 2 percent.
Reporting by Andrea Shalal; editing by Gunna Dickson