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The orders are clearly being driven by Western companies that are experiencing increased order flows due to the long wave of rising military spending of more than $2.2 trillion annually globally...
$52 billion in annual cash flows: this is the expected revenue for 2026 of the top fifteen defense companies globally. A value twice as high compared to 2021.
These are the findings of 'Vertical Research Partners', an analysis company dedicated to studies of the corporate world and industry, which have shown the financial and productive health of the global defense system.
An increasingly dynamic world
An operational cash flow dictates the delivery of weapons systems, from missile launchers to fighter jets, from tanks to drones, to public customers, the current unfolding of the customer-supplier relationship in the Defense industry with order payments to suppliers. So, a process of rearmament that goes from planning to implementation of programs.
Orders are clearly being driven by Western companies that are experiencing increased order flows due to the long wave of rising military spending of more than $2,200 billion a year globally. Added to this are the prospects opened up by the procedure for the supply of arms to Ukraine.
"Recently outgoing NATO Secretary Jens Stoltenberg added the idea of creating a $100 billion fund linked to the Atlantic Alliance to support Ukraine. This fund should guarantee Kiev's military supplies for five years"- An example of what is happening at a public level on the sustainability of rearmament policies, to which the 'Financial Times' adds the discussion on the new structures of the global defense ecosystem, which sees a new dynamism of the sector in the financial and market field of shares and, at the same time, the capitals of the most successful companies work to consolidate supply chains.
Groups such as Saab, Leonardo, Rheinmetall, Indra, Thales have raised tens of billions of euros in stock market value driven by excellent operating results and growth prospects and at the same time defensively, extra earnings are activating a consolidation process reminiscent of the biomedical and pharmaceutical sectors of the post-Covid era.
Agreements heat up the sector
There are more and more offers in the defense sector. In Italy, Leonardo is redefining its business: it has sold the armaments and underwater systems business to Fincantieri and is trying to enter the tank business in synergy with German companies. Near Berlin, Rheinmetall is consolidating itself as one of the most strategic companies in Europe, as already demonstrated in 2023 with the launch of joint ventures in Ukraine for vehicle repair and system assembly.
The German group, the FT notes, "earlier this month announced a $950 million deal for Michigan-based military vehicle component maker Loc Performance." And it's not the only deal that has started: “Czechoslovak Group is making a bid for American Vista Outdoor's ammunition business. Last summer BAE Systems paid $5.6 billion for Ball Aerospace, a supplier of mission-critical space systems. It financed the deal through existing cash and new external debt.”
The essence of the conflict between states
All this vibrancy is destined to increase in the coming years. Orders are growing, investment is growing, business is growing: and meanwhile, as the world prepares for the war economy, the process of military Keynesianism allows states to use defense spending as a lever to pump public liquidity into economic growth and employment.
But apart from rearmament, are our ruling classes ready to manage the climate of inter-power conflict? Recent years seem to provide a less than comforting answer to this question. Arsenals of any size in the hands of wise leaders are not scary. On the contrary, increasingly full arsenals entrusted to leaders without strategic vision can be potentially dangerous. And we must not forget this. /Adapted "Pamphlet" from "Inside Over"
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