Global Defense Industry Suppliers: CEO Business Outlook Survey 2012–2013

Tuesday 22 May 2012, Amsterdam

Overall, throughout the global defense supplier industry, 44% of C-level respondents are ‘more optimistic’ about revenue growth for their company over the next 12 months relative to the previous 12 months. A further 31% of C-level respondents are ‘neutral’ about revenue growth, as compared with 22% who are ‘less optimistic’ about their company’s revenue prospects.

33% of C-level respondents expect an increase in marketing expenditure of between 1% to 10% in 2012, while only 5% of respondents expect a decrease of between 1% and 10% (reference see graph below). Marketing budgets of global defense supplier industry supplier companies are expected to rise by an average of 8.8% over the next 12 months. Suppliers’ C-level respondents plan to spend more on ‘email promotions’. For C-level respondents, media channels such as ‘email promotions’, ‘email educational messages’, ‘webinars’, and ‘web conferencing’ are still the best way of communication and advertising.

C-level executives from the global defense supplier industry expect increased levels of consolidation over the next 12 months. Of all C-level respondents, 57% project either a ‘significant increase’ or an ‘increase’ in M&A. However, 32% of C-level respondents expect no change in consolidation activities in 2012. The expected levels of consolidation in the industry could be due to new cost or demand pressures, repayment of debt, the potential need to meet new compliance procedures, quick access to new markets, business expansion, and an increase in market share. Additionally, suppliers reveal that they will increase capital expenditure towards‘new product development’ and ‘machinery and equipment purchase’over the next 12 months.

Global defense industry respondents identify the Middle East to be the most important region for growth among emerging markets, followed by India, China, and Brazil. Defense expenditure across the Middle East is expected to grow by 14% in 2011–2016, with Saudi Arabia and the UAE emerging as the key spenders. The majority of the region’s military expenditure is aimed to upgrade existing equipment and augmenting defense capabilities, and these measures have primarily been adopted to counter the increasing threat from nuclear capable countries, homeland security concerns, and to protect critical infrastructure.

On the other hand, according to 44% of C-level respondents, South Korea is expected to project the greatest demand for defense products and services in 2012–2013. Additionally, 40% of C-level respondents chose Singapore, Taiwan and Hong Kong, and 31% chose USA, as their preferred investment destinations.