War to drive ‘compelling’ Chemring to booming profits

British defence specialist Chemring is set to report its highest profit in nearly a decade next week, as rising geopolitical tensions prompt a surge in global defence spending.

British defence specialist Chemring is set to report bumper profits in its results next week, as rising geopolitical tension around the world prompts a surge in the government’s defence spending.

Analysts have forecast the Hampshire-headquartered firm will report an adjusted operating profit in the range of £67m for the year.

Shares are up nearly 11 per cent in 2023 on consistently strong demand. Chemring reported a surge in orders in the first half of this year, as Western governments shell out on weapons amid the war in Ukraine and rising geopolitical tensions globally.

Chief executive Mick Ord said at the time he had witnessed a “fundamental change in the security landscape” over the last 18 months, as Chemring’s order book reached a record £750m. Since the announcement, fresh conflict has broken out in the Middle East between Israel and Hamas.

The aerospace and defence engineer supplies materials and components for a range of missile systems, as well as explosives and propellants to a number of defence contractors.

In a November note, Berenberg analysts described Chemring’s valuation as “compelling” given its “energetic outlook.” Analyst George Mcwhirter said “robust” market growth lay ahead and is “expected to be maintained over the long term.”

Chemring launched a £50m share buyback programme in August, prompting shares to jump over four per cent. 

Fellow defence companies BAE Systems and Lockheed Martin have reported bumper profits this year. BAE, Europe’s largest defence contractor, netted £1.23bn in its half-year results in August and hiked its dividend by 11 per cent.

Boss Charles Woodburn told analysts on a follow-up conference call the company had benefitted from its “strong presence across all theatres of warfare,” and global reach in countries ranging from the US, UK and Australia to the Middle East and Japan.