General Dynamics revenue rises on strong demand for weapons

By Mike Stone and Pratyush Thakur

(Reuters) -General Dynamics Corp on Wednesday reported a 5.2% rise in quarterly revenue, boosted by strong demand for munitions amid geopolitical instability caused by Russia's full scale invasion of Ukraine.

Shares were down 5.5% to $210.40 during early trading in New York after Chief Executive Officer Phebe Novakovic warned second quarter revenue would be lower than anticipated due to investments the company is making into building its newest business jet, the G700, which is expected to receive FAA certification by late summer.

"We plan to deliver a considerable number of G700s in the third and fourth quarters. To do that we must build them now and incur some period costs without the related revenue. This has impacted the first quarter and will impact the second quarter."

Sales at General Dynamics' aerospace unit, which makes Gulfstream jets, declined marginally in the first quarter. Gulfstream deliveries in the first quarter were at 21 jets, down from 25 in the same period a year ago.

U.S. defense contractors have benefited as the war in Ukraine and tense U.S.-China relations have fueled demand for weapons such as tanks, submarines and munitions.

Orders at General Dynamics' Combat Systems business unit which makes tanks and munitions were at their highest level in eight years. The war in Ukraine has caused many militaries to increase their focus on the depth of their munitions stockpile.

Revenue in the first quarter rose to $9.88 billion, compared with $9.39 billion a year earlier.

However, quarterly profit was flat at $730 million, as supply chain disruptions and labor shortages continue to hobble production.

Many aerospace industry companies are suffering similarly as the impact of the pandemic, especially with regards to retaining or training skilled labor, continue.

The company has said "abnormally high retirement" of workers had impacted its electric boat unit, which assembles nuclear-powered submarines.

Revenue at the Marine Systems unit, which makes ships in addition to submarines, increased 12.9% versus the same period a year ago with profit flat.

Any increase in sales stemming from the recently agreed AUKUS submarine deal is still far in the future. However the first boat in the U.S.'s Columbia-class submarine fleet is now one third complete, the company said.

(Reporting by Mike Stone in Washington and Pratyush Thakur in Bengaluru; Editing by Shinjini Ganguli and Sriraj Kalluvila, Kirsten Donovan)