BAE Systems said German moves to block exports to Saudi Arabia could damage its major deals with the Kingdom and weigh on Britain's biggest defence company's financial performance.
BAE said it was reliant on the approval of export licences by a number of governments in order to continue supplies to Saudi Arabia.
"BAE Systems is therefore working closely with the UK government to minimise the risk of any such occurrence and the impact it would have on financial performance, the supply chain and relationships," it said in its annual results on Thursday.
Shares in BAE slid 5.9 percent in early trading in London.
Germany is part of the consortium that builds the Eurofighter Typhoon, a fighter jet that BAE has sold to Saudi Arabia, through Airbus and MTU Aero Engines.
Germany's government is trying to halt weapons exports to Saudi Arabia after the killing of Saudi journalist Jamal Khashoggi in the Saudi consulate in Istanbul on Oct. 2, but Britain has urged the country to exempt big defence projects or face damage to its commercial credibility.
On Wednesday, German Foreign Minister Heiko Maas said that future decisions on whether to deliver arms to Saudi Arabia will develop on how the conflict develops in Yemen.
BAE makes 14 percent of its annual sales from selling Typhoons and other arms to the kingdom, and the tensions have raised questions about the UK government's 10 billion pound deal to sell Saudi Arabia 48 new Typhoons.
The deal, confirmed in a memorandum of understanding last March, has not been finalised, and is not reflected in BAE's 2018 financial statements.
"The issue of German licences is a political issue and as such requires it to be resolved at the political level," Chief Executive Charles Woodburn told reporters on Thursday.
"To that end, we're working closely with the UK government," before adding "there's also a concern among industry partners such as Airbus."
Despite the issue of Saudi exports and other geopolitical uncertainty, BAE said its earnings would grow in 2019 compared to a flat 2018.
BAE said it expected mid-single digit growth in underlying earnings per share in 2019, compared to a full-year figure for last year of 42.9p, roughly flat on the previous year and in line with expectations.
"The Group made good progress in strengthening the outlook and geographic base of the business, with a number of significant contract wins," Woodburn said.