Healthy Financials and Appropriate Risk Management Practices are Essential for Companies in Aerospace and Defense, Advises Frost & Sullivan
-- Strong cash flow management and free cash flow generation are key requirements to maintain a healthy financial position
MOUNTAIN VIEW, California, Jan. 31, 2013 /PRNewswire/ -- Ongoing economic slowdown and volatility in fuel costs have negatively impacted the demand for air travel, a key driver for the aerospace industry. At the same time, budget cuts have translated into limited spending on defense equipment. In this scenario, it is critical that companies achieve excellence in financial and risk management to outperform the competitors and offer value to shareholders.
New analysis from Frost & Sullivan (http://www.financialservices.frost.com), Financial Assessment of the Global Aerospace & Defense, Airlines and Airport Services Industries, finds that investors are increasingly cautious and risk averse about their portfolio investments. This is negatively affecting the capital intensive aerospace and defense industry. Investors are unwilling to commit huge amounts of money to an industry that has a longer gestation period than most others.
If you are interested in more information on this study, please send an e-mail to Jeannette Garcia, Corporate Communications, at email@example.com, with your full name, company name, job title, telephone number, company email address, company website, city, state and country.
"With governments cutting down on defense budgets, the aerospace and defense industry is taking a hit as demand is slowing down," noted Frost & Sullivan Financial Analyst Bharath M. "For instance, in 2011, the sales of Britain's largest defense equipment manufacturing employer, BAE Systems, dipped by 14 percent due to continuous cuts in military spending in the United States."
Budget cuts also increase competition among the existing participants and heat up the battle for the available amount, thereby increasing the need to maintain excellent financial and risk management practises.
Though interest rates are currently low, economic conditions in the Eurozone and other developed countries makes it difficult for participants to raise capital, especially in an industry that is characterized by high capital requirements and lengthy pay back periods. Some of the banks that have financed the aerospace and defense industry earlier are more reluctant to do so now.
"Borrowing from different sources instead of depending on a single source is slowly gaining momentum," remarked Bharath. "This strategy increases the interest rate risk and the responsibility is on CFOs to adopt appropriate risk management and mitigation practices, such as interest rate swaps and forward rate agreements."
Also, other risks involved with regular operations such as credit risk, liquidity risk, foreign exchange risk and interest rate risk need to be addressed using suitable risk management practices, such as bank guarantees and interest rate swaps.
"Maintenance of fixed assets, including land, buildings, civil works and other infrastructure facilities also play a key role in ensuring smooth operations, which in turn directly impacts profitability," concluded Bharath. "Effective cash flow management and a strong focus on free cash flow generation are critical to achieving excellence in financial and risk management."
Financial Assessment of the Global Aerospace & Defense, Airlines and Airport Services Industries is part of the Business and Financial Services subscription. Frost & Sullivan's related research services include: Financial Assessment of Global Packaged Food Industry, Financial Assessment of Global Communications Industry, Financial Assessment of Global Banking Industry, Financial Assessment of Global Insurance Industry. All research services included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.
Frost & Sullivan's Business and Financial Services group serves clients around the world in all aspects of financial analysis, market research and monitoring, due diligence, idea generation, opportunity analysis, investment valuation, and other proprietary research.
About Frost & Sullivan
Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants.
Our "Growth Partnership" supports clients by addressing these opportunities and incorporating two key elements driving visionary innovation: The Integrated Value Proposition and The Partnership Infrastructure.
- The Integrated Value Proposition provides support to our clients throughout all phases of their journey to visionary innovation including: research, analysis, strategy, vision, innovation and implementation.
- The Partnership Infrastructure is entirely unique as it constructs the foundation upon which visionary innovation becomes possible. This includes our 360 degree research, comprehensive industry coverage, career best practices as well as our global footprint of more than 40 offices.
For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies?
Financial Assessment of the Global Aerospace & Defense, Airlines and Airport Services Industries
Corporate Communications – North America
SOURCE Frost & Sullivan
More by this Source
Get content for your website
Enhance your website's or blog's content with PR Newswire's customised real-time news feeds.
Contact PR Newswire
Send us an email at MarketingUK@prnewswire.co.uk or call us at +44 (0)20 7454 5382
Become a PR Newswire client
Request more information about PR Newswire products & services or call us at +44 (0)20 7454 5382