Mike Stone and Ashwini Ashwini

(Reuters) – U.S. weapons maker Northrop Grumman Corp (NYSE 🙂 posted a drop in its first-quarter sales, adjusted profit and net income on Thursday. The decline was caused by supply chain and labor shortage issues.

A severe labor shortage was caused by the Omicron-led rise in coronavirus infections. This led to a far higher demand than supply.

In the last earnings call, Kathy Warden, Northrop’s chief executive officer, warned of COVID-related impacts on the supply and labor chain. This was especially true in the aerospace sector.

A 9.6% drop in revenues was reported by the aeronautics division, which produces the central fuselage for fighter-jets.

The invasion by Russia of Ukraine in February 2017 has led to a rise in defense spending both in the United States and in other countries. This is because they are bolstering their defenses.

The $5.79 trillion budget proposal that President Joe Biden submitted to Congress last month calls for record-breaking peacetime military spending at $813 billion. This is an increase of $778 billion from last year.

Company maintained 2022 forecast. This indicates that there is a sustained demand for their products, aided in part by increasing geopolitical tensions. The projected sales range from $36.20 billion to $36.60 billion.

The company expects full-year adjusted earnings per share between $24.50 and $25.10.

Northrop’s sales in the space system business grew 13.2% to $2.86billion. This is its third straight quarterly increase.

Additionally, profit and sales in the first quarter were lower due to the sale of the IT services company early in 2021.

Quartly adjusted net earnings decreased to $955million, or $6.10 per shares, from $1.08billion or $6.57 a share a year ago.

From $9.16 billion last year, the company saw its total revenues fall to $8.80billion in the first quarter.