BAE Systems PLC (LSE:BA.) has landed another big naval contract, this time from Norway. Oslo has chosen the company’s Type 26 frigate for a fleet of five ships worth around £10 billion, the UK government confirmed yesterday.
The deal extends the Type 26 production line in Britain by five years, out to about 2040, and takes total orders for the vessel to 13 for the UK and a further five for Norway.
Citi reckons the Norwegian contract is worth about 10–15p a share for BAE, based on £2 billion per ship, 10% margins and the longer production run.
The Type 26, also known as the Global Combat Ship, is shaping up to be the world’s leading anti-submarine frigate outside the US.
Australia has ordered 12, Canada 15, both to be built locally, and Citi notes that “this may lead to further orders”.
For BAE, which is already riding a wave of defence spending, the Norwegian deal keeps the yards busy for longer and offers a little extra for shareholders too.
The shares were off 1% at 1,775p.