BA. Bae Systems Plc

By Robert Wall

LONDON--British weapons maker BAE Systems PLC (BA.LN) appointed Charles Woodburn as its next chief executive to replace Ian King in a long anticipated leadership reshuffle at one the Pentagon's top arms contractors.

Mr. Woodburn, a former oil and gas industry executive, joined BAE last year in the newly created role of Chief Operating Officer. It effectively made him the heir apparent to industry veteran Mr. King, who became CEO in 2008. Mr. Woodburn is set to take the top job on July 1.

Mr. King's most ambitious move as CEO was the proposed merger in 2012 of BAE with Airbus SE, then still called European Aeronautic Defence & Space Co. The deal would have brought BAE back into the booming commercial plane making business after it sold its 20% stake in Airbus in 2006. The merger faltered on opposition of the German government that worried about losses in local defense jobs.

Mr. Woodburn inherits an improving budget environment for defense companies after Mr. King navigated a period of contracting or low growth in some of BAE's most important markets. The U.K. is boosting military spending and the defense budget in the U.S., a major market for BAE, also is poised to grow more strongly. Other European states also have signaled they would bolster military and security spending amid concern of Russian military activity and unrest in the Middle East.

BAE could be an early winner from efforts in the U.S. to repair and overhaul warn out equipment from decades of war, analysts believe. BAE revenues from ship repair could move "materially higher" if U.S. Navy maintenance spending rises, Bernstein Research said in a note.

The British manufacturer is also a major partner on the Lockheed Martin Corp. F-35 Joint Strike Fighter program, the Pentagon's largest acquisition project that has drawn scrutiny from President Donald Trump. BAE is expected to benefit from a planned boost in production of the radar-evading combat plane.

Mr. Woodburn faces some headaches too. A long-sought follow-on order for Eurofighter Typhoon combat jets from Saudi Arabia has failed to materialize in recent years. Some lawmakers in Britain have tried to curtail arms sales to Saudi Arabia over concern about the country's actions during the war in Yemen. Saudi Arabia is one of BAE's largest markets. BAE's costs on some big British submarine programs have risen too, the government's National Audit office said last month.

Before joining BAE, Mr. Woodburn was chief executive for Expro Group International PLC since 2010 and previously worked at oil services group Schlumberger Ltd. BAE said Mr. Woodburn's base salary as chief executive would be 875,000 pounds ($1.1 million).

BAE is slated to report 2016 full-year results on Thursday, with net profit expected to advance to GBP997 million from GBP918 million in the previous year, according to analysts surveyed by Thomson Reuters. The company is expected to report a 3% rise in sales to GBP18.44 billion.

--Razak Musah Baba contributed to this article.

-Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

February 22, 2017 05:58 ET (10:58 GMT)

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