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General Dynamics saw $1 billion bump after Canada-Saudi accord
By: Joe Gould 1 day ago
WASHINGTON ― General Dynamics has received $1 billion since the renegotiation of a $10 billion contract for Canada to sell light armored vehicles to Saudi Arabia, company officials said on its first quarter earnings call.
In a deal last month, Canada lifted its ban on arms sales to Saudi Arabia, which in turn agreed to a speedier payment schedule for the LAVs. Canada had the vehicles on hold since 2018, following the death of Saudi journalist Jamal Khashoggi; and by October, Saudi Arabia had racked up $1.5 billion in back payments to General Dynamics.
Amid news on the April 29 call that the company's revenue fell $512 million in connection with the coronavirus pandemic, General Dynamics Chief Financial Officer Jason Aiken highlighted “the formal signing of the restructured contract on the Canadian international program, which settled all issues to the satisfaction of the parties.”
“With respect to our standing receivable you may recall that we received $500 million early in the first quarter and we received another $500 million this month. This will be very helpful to free cash flow in the second quarter,” Aiken said.
“We will begin a regular cadence of scheduled payments in 2021 consistent with deliveries and making further progress in the scheduled amortization of the arrearage.”
The company's Combat Systems division had revenue of $1.7 billion, up 4.4 percent over the same quarter last year, and sales to the U.S. government were up 12 percent. The firm's aerospace business segment also had revenue of $1.7 billion, but that represented a 23 percent fall from the same quarter last year.
On April 9, Canada's foreign affairs minister, François-Philippe Champagne, announced Ottawa was “able to secure significant improvements” to the LAV contract, including more latitude for the Canadian government to speak about it.
Under the new terms, Canada could also delay or deny export permits without penalty if it learned Saudi Arabia was not using the vehicles for their stated purpose. Ottawa would also be reviewing permit applications on a case-by-case basis to ensure they meet Canadian law and the U.N. Arms Trade Treaty.
Though the Trudeau government has been under political pressure to scrap the LAV deal over human rights concerns, Champagne said its cancellation would have “resulted in billions of dollars in damages” and risked thousands of Canadian jobs across the defense supply chain.
The vehicles are made by the General Dynamics Land Systems subsidiary in London, Ontario.
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