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Northrop Grumman Declares Fourth Quarter Losses Worth USD 2.5 billion

2009-02-05 Northrop Grumman, the US's third-largest defence group, said on Tuesday it had made a net loss of $2.5bn in the fourth quarter of 2008 after writing down the value of acquisitions it made several years previously.

The Los Angeles-based company had warned last month that the fall in equity markets last year had prompted it to take a $3.1bn charge in the fourth quarter after writing down the book value of businesses it took over in 2001 and 2002 which are now part of its shipbuilding and space units.

The company, the world's largest warship builder, reported a quarterly net loss of $2.54bn or $7.76 a share, compared with a year-ago profit of $457m or $1.32 a share. However, excluding the goodwill charge, the company's fourth quarter earnings rose 19 per cent to $1.57 a share.

Shares in the company rose 2.5 per cent to $47.77 a share in early morning trading in New York.

Northrop said sales in the fourth quarter rose 4 per cent to a record $9.2bn. For 2008 as a whole, sales increased 6 per cent to $433.9bn. Strong demand for nuclear submarines – Northrop won part of a multi-billion dollar order for eight Virginia-class nuclear submarines in December - and electronic systems helped boost the company's order backlog to a record $78bn.

In the UK, Northrop was selected to provide a new computer-aided dispatch system for the London Ambulance system to handle emergency calls and ambulance movements.

For 2009, Northrop said it expected earnings per share on continuing operations to come in between $4.50-$4.75.

The company is waiting to hear details from Barack Obama's administration of a new competition to supply the US Air Force with refuelling tankers to replace 179 Eisenhower-era tankers this spring. Northrop, together with European partner EADS, beat rival Boeing for the contract last February. However, Robert Gates, defence secretary, subsequently cancelled the competition and called for a "cooling off" period after Boeing successfully protested the award. The decision was taken to run a new competition this year.

Northrop is also awaiting fresh details of the upcoming defence budget. Mr Gates recently told Congress the Pentagon would be forced to make hard choices in the upcoming budget for 2010 as the department looks for ways to pay for two wars during the current financial crisis.

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