BAE Systems PLC (LSE:BA.) said it expects the Ukraine war to feed through into much higher spending by European countries on weapons in future.
Germany has already announced a significant step-up in its defence expenditure following the Russian invasion of Ukraine and BAE sees other countries following suit.
“We see other nations increasing or likely to increase their defence budgets to address the threat environment and for NATO countries to move to, and even beyond, their 2% of GDP commitments,” it said alongside a trading update today.
BAE is involved in Europe through the Eurofighter Typhoon, its Hägglunds and Bofors businesses based in Sweden, through MBDA and also through US foreign military sales.
“We are pursuing a number of significant opportunities in the region,” it said.
Elsewhere, it said the US defence spending outlook is positive with funding support maintained for many key programmes, while in the UK there is a growing commitment to cyber defence as well as warships, submarines and aircraft.
BAE added that first-quarter trading has been in line with expectations with strong order intake and good operational performance.
There is some supply chain pressure, BAE noted, especially on delivery lead times and staffing, but said it continues to mitigate the major financial impacts.
Guidance for 2022 was maintained at revenues of £21.3bn, up 2%-4%, underlying profits of £2.2bn, up 4%-6%, and free cash flow of more than £1bn.
In a seeming swipe at its ESG critics, BAE added that the global events have more than ever demonstrated the need for strong defence and security in the face of aggression by nation-states and that "it is important to recognise the defence industry's contribution to security and prosperity".