Huntington Ingalls Industries [HII], the largest builder of Navy surface ships, yesterday reported earnings of $40 million for the second quarter of 2011 after suffering losses in the same period last year.
The profit margin of 5.8 percent came after a 1.2 percent decline–or an $11 million loss–in the April-June quarter of 2010, the company reported. Revenues, however, dropped by 2.9 percent from $1.61 billion to $1.56 billion.
Huntingon Ingalls attributed the fall to lower sales on the DDG-51 Arleigh Burke-class destroyers, and less revenue since the successful completion of maintenance on the USS Enterprise (CVN-65), which is slated for decommissioning in 2013.
The company received about $1 billion dollars in new contracts for the three-month period, highlighted by a construction contract for the DDG-113.
The naval shipbuilding industry is facing a potential squeeze in the budget and possible construction delays amid planned cutbacks in defense spending over the next decade to rein in the federal deficit.
Huntington CEO and President Mike Petters warned during a conference call that delays in getting construction underway could erode efficiencies and stability and cause costs on aircraft carriers and destroyers to grow over the long term.
“The challenge that you have when you start to decline the budget is that people want to stretch things out, they want to delay procurement or they want to delay schedules,” he said. “And what happens with that is it brings great inefficiencies into the production line.”
The firm’s Ingalls unit suffered a $6 million decrease in revenue, from $714 million to $708 million dollars, in the same period due to lower sales of the DDG-51. Ingalls posted a profit of $19 million in the second quarter compared to a $94 million loss last year. The decline in revenue was partially offset by increased sales in the LHA amphibious assault ship program, the company said.
Plans to wind down shipbuilding operations at its Avondale yard put a dent of $115 million in revenues because of costs associated with closing the facility.
Newport News revenues dipped by $41 million in the second quarter from the 2010 period, from $913 million to $872 million, primarily driven by lower sales on the USS Theodore Roosevelt (CVN-71) and USS Gerald R. Ford (CVN-78) carriers. Profit was down 6 percent to $79 million.