British arms manufacturer BAE Systems said Thursday that net profits rose by almost 18 percent in 2011, despite falling revenues as military budgets were cut in Britain and in the United States.
Earnings after tax hit £1.24 billion (1.49 billion euros, $1.95 billion) last year, boosted by one-off items such as research-and-development tax credit, the company said in a results statement.
However, earnings before interest, taxation, amortisation and impairment of intangible assets slid 7.1 percent to £2.03 billion.
Sales sank 14 percent to £19.154 billion as cash-strapped governments axed spending on defence and security equipment and services, while the company's order book shrank to £36.2 billion.
"BAE Systems is operating in a difficult business environment as defence spending reduces in its largest markets, the US and UK," the group said.
"These market pressures have been apparent for some time. BAE Systems has moved quickly to take strategic actions it believes necessary to sustain and position the business for the future."
BAE also indicated that it has not abandoned hope that India could reconsider its recent decision to negotiate exclusively for 126 French Rafale fighter jets with Dassault Aviation, over the British-backed Eurofighter Typhoon.
"In January 2012, the group was notified that Typhoon had not been selected as the lowest priced compliant bid to meet the requirement for a medium multi-role combat aircraft," it said in reference to the Indian order.
"The programme has a long way to go before a contract is awarded and we continue to actively support the bid."
The Eurofighter project involves companies from Britain, Germany, Italy and Spain.
BAE said it would continue to cut costs while focusing on the development of international markets and faster-growth activities like cyber-security.
The company, which has a global workforce of 100,000 staff, added that it has axed 22,000 jobs over the past three years in response to reduced military spending around the world.
Looking ahead, BAE said successful conclusion of negotiations for a crucial Saudi Arabian fighter jet contract would underpin earnings growth this year.
"Whilst little sales growth can be expected for the group in 2012 in the current market conditions, modest growth in underlying earnings per share is anticipated, assuming a satisfactory conclusion to Salam negotiations in 2012."
The group also hiked its 2011 shareholder dividend 7.4 percent to 18.8 pence per share.
BAE's share price fell as investors reacted to news of falling revenues. The stock lost 2.73 percent to 323.90 pence in midday deals on London's FTSE 100 index of leading companies, which was down 0.67 percent.