Raytheon Technologies announced in an earnings call this morning that it is reorganizing its business units -- promising to relieve "friction" in the company.
The defense technology company will “realign” its business into three focused segments: Collins Aerospace, Raytheon and Pratt & Whitney, a move that will be implemented in the second half of this calendar year.
“Our plan is to streamline our structure to a customer-centric organization with three focus segments: Collins Aerospace, Raytheon and Pratt & Whitney. This will better align us with our customers’ needs and allow us to better collaborate on next-generation technology,” Greg Hayes, Raytheon’s chairman and chief executive officer, said on the call.
Reorganizing Raytheon into three business units will make the company more competitive and capture “additional revenue synergies,” according to Christopher Calio, the company’s chief operating officer.
“Large organizations like ours -- you won't be surprised to hear that sometimes there's some friction there and we think this will help remove some of that friction, and again, provide better solutions to the customer,” Calio added.
Despite “significant challenges” in 2022, including transitioning out of Russia, and inflation and supply chain constraints, Hayes said Raytheon totaled $67.1 billion in sales during 2022.
Collins reported a 5% increase in military sales and Pratt reported a 2% decrease. Raytheon’s space division recorded lower adjusted sales of 8%, while the missile defense division recorded higher adjusted sales, up 6%, according to a presentation accompanying the earnings call.
During the call, company executives noted that Raytheon will continue to face supply chain issues into 2023 -- specifically listing rocket motors, microelectronics and castings as persistent problems.
“As we head into 2023, I will tell you the future remains bright for RTX, especially with a $175 billion backlog and strong demand on all of our end markets. But also the challenges that we saw in 2022 will continue and we’ll keep working to mitigate the big three that we continue to focus on: supply chain, labor and inflation,” Hayes said.
In addition to supply chain, Hayes lamented Congress’ decision to keep a research and development tax change that requires companies to deduct their R&D expenses over a five-year period rather than annually.
“We obviously thought going into the end of 2022 that the tax legislation, the R&D amortization, would get eliminated. Unfortunately, that didn't happen [and] cost us $1.6 billion last year and . . . it'll be another $1.4 billion and as we go into the 2025 timeframe, that drag will still be about $1 billion,” Hayes said.
“We hope that people in Washington will understand that they're making a very, very bad tactical decision here in not allowing us to deduct R&D, but it is the reality that we face today,” the CEO added.