R&D, offshore expansion growth drivers for aerospace: report

Global focus may represent opportunity for Canadian market; new manufacturing technologies will drive future innovation.

TORONTO — While mature aerospace and defence markets continue to stagnate, companies are under pressure to deliver to investors and shareholders, and Canada may be an attractive option for growth, according to KPMG International’s 2015 Global Aerospace and Defense Outlook, which concludes that organizations are looking for any opportunity to sustainably reduce costs and create new growth platforms.

Over the next two years, keeping the business model competitive will be the biggest challenge for aerospace and defence firms (38%). Historically, the US and the UK have turned to China and India when looking to remain competitive through international expansion. But, from acquisition prospects to supply chain development to significant federal funding programs, the report suggests Canada may now be looking like a more promising player.

Highlights from the study include:

Increasing sales and decreasing spend is a top strategic priority over the next two years for 53% of respondents to build strength, remain relevant and meet important targets, followed by 47% who want to reduce their cost structure.

Overseas expansion and portfolio shaping will also create new growth opportunities. More than a quarter of respondents say they will enter into new geographic markets, which could represent a growth opportunity for Canada.

Investing in research and development will increase as organizations look to new technologies and services for growth. Forty-one per cent of companies plan to spend in excess of 6% of revenues on R&D over the next two years, a 13% increase compared to the last two years. Half of all respondents say they expect new manufacturing technologies to drive future innovation.

Companies are reorganizing their supply chains to support future global growth and reduce working capital. A third of all respondents list restructuring the supply chain as a top priority this year and more than half are focused on lowering costs and working capital levels across the entire supply chain.

The Global Aerospace and Defence Outlook is based on a survey of 68 senior executives, all holding director-level or c-suite roles within their organization.

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