Despite increased demand caused by the war in Ukraine, profits for the world's largest defense companies fell in 2022. Sales of weapons and military services by the 100 largest defense companies amounted to $597 billion (around €549 billion) last year, according to a report published on Monday by the International Peace Research Institute in Stockholm (Sipri). Accordingly, sales fell by 3.5 percent compared to 2021.
Sipri researcher Diego Lopes da Silva told the AFP news agency that the figures were "unexpected" given geopolitical tensions and the Russian invasion of Ukraine. The decline shows "that there is a certain amount of time between a demand shock like the war in Ukraine and the ability of companies to ramp up production and really meet demand," explained Lopes da Silva.
According to Sipri, the decline is largely due to lower profits from US companies that have struggled with "supply chain problems and labor shortages" related to the corona pandemic. U.S. sales fell 7.9 percent but still accounted for 51 percent of total 2022 profits. 42 of the 100 largest defense companies came from the USA.
Russian defense companies saw their profits fall by twelve percent to $20.8 billion. According to Lopes da Silva, this was due on the one hand to Western sanctions and, on the other hand, to a lack of payments from the Russian state. In addition, it is more difficult to obtain data from Russia, which is why only two Russian companies were taken into account.
According to Sipri, weapons manufacturers in the Middle East, Asia and Oceania were able to respond more quickly to growing demand because the weapon systems manufactured there are less complicated than in the USA. Turkish defense companies in particular benefited from the high demand, especially the drone manufacturer Baykar, whose products are used in Ukraine.
The second largest arms manufacturer, China, increased its revenue by 2.7 percent to $108 billion.
According to Lopes da Silva, demand is not expected to decrease. "In the company reports, we noticed that the orders received and the order backlogs of the companies are increasing sharply." Sipri therefore assumes that military spending will continue to rise and that the profits of defense companies will ultimately also increase.