Lockheed warns Sikorsky could underperform

Thomson ReutersAn Austrian army Sikorsky S-70 “Black Hawk” helicopter hovers over a statue of Archduke Charles as it lands in Vienna

WASHINGTON (Reuters) – Lockheed Martin Corp , the Pentagon’s No. 1 supplier, on Wednesday warned investors that the Sikorsky helicopter unit it acquired last year could underperform, given changes in oil prices and other global economic conditions.

Lockheed included the warning in its annual 10-K filing with the U.S. Securities and Exchange Commission, saying it remained upbeat that it would benefit from the unit it bought from United Technologies Corp for $9 billion last year.

“However, the integration process is complex, costly and time-consuming and we may not be able to capture anticipated synergies, tax benefits, cost savings, and business opportunities in the time frame anticipated, or at all,” the company said.

Lockheed Chief Financial Officer Bruce Tanner told analysts last month that the sustained drop in world oil prices had halved the company’s projected forecast for Sikorsky’s commercial helicopter sales from July, when the deal was first announced.

Lockheed said concerns raised by Pentagon officials about defense industry consolidation in connection with the Sikorsky acquisition could change the company’s business relationships and its ability to compete for future orders.

Pentagon chief arms buyer Frank Kendall on Tuesday said other government agencies are now reviewing his draft of legislative language that would give the U.S. Department of Defense (DOD) more leverage to block large mergers and acquisitions outside the traditional antitrust reasons.

“Changes in DoD policy or perception of our size could have adverse impacts on our business, including our success in future contract pursuits,” Lockheed said.

(Reporting by Andrea Shalall; Editing by Andrew Hay)

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