March 13, 2013 / 8:05 AM / 5 years ago

REFILE-UPDATE 2-Elbit Systems eyes growing defence budgets in emerging markets

* Q4 adjusted EPS $1.62 vs $1.42 in 2011

* Q4 revenue $843.9 mln vs $841.9 mln

* Sees growth in Asia, South America, Australia

* Shares up 2 pct in Tel Aviv

* Dividend unchanged at $0.30

By Tova Cohen

TEL AVIV, March 13 (Reuters) - Growing defence budgets in Latin America and Asia-Pacific are boosting sales and profit at Israeli defence electronics firm Elbit Systems , helping to offset declining budgets in the United States and Europe.

Chief Executive Joseph Ackerman, who is retiring at the end of March, announced improved fourth-quarter results on Wednesday and said that the company is well prepared for budget constraints in many of its markets.

Ackerman said that defence spending cuts are not in the niche segments in which Elbit specialises, such as protection technology, command and control systems, unmanned aircraft, intelligence technology and electronic warfare.

Last year was a relatively good year for Elbit and “2013 will be even better”, he said in an interview with Reuters.

Elbit is Israel’s largest publicly traded defence company, but three quarters of its business is overseas. The United States accounts for 30 percent, Asia-Pacific 25 percent and Europe 20 percent.

“We are going to see Europe declining for Elbit and will see growth in Asia, South America and Australia. The U.S. will stay the same percentage-wise,” Ackerman said.

The CEO believes that the decline in European defence budgets has bottomed out and spending will even increase in some countries.

He said that Elbit will seek to strengthen its presence in the United Sates, where any further spending cuts are likely to affect large platforms such as tanks and aircraft.


Emerging economies such as India and Brazil, as well as Australia and South Korea, will increase their defence spending, Ackerman added.

Fourth-quarter earnings per share excluding one-off items rose 14 percent year on year to $1.62. Revenue edged up to $843.9 million from $841.9 million, with lower expenses helping to boost profit.

Ella Fried, an analyst at Leumi Capital Markets, said the results were in line with market expectations and the company’s target for low single-digit revenue growth in 2012.

“The company, given cuts in the West, had very good results, offsetting these cuts with strong results in the rest of the world. For the coming year we expect similar trends,” she said.

Elbit shares were up 2 percent at 143 shekels in afternoon trade, compared with a 0.1 percent decline in the blue-chip Tel Aviv 25 index.

Its order backlog rose to $5.68 billion at the end of 2012, from $5.53 billion a year earlier.

Ackerman, who has worked at Elbit for 31 years including 17 as CEO, will be replaced by Bezhalel Machlis, who served as general manager of the company’s land division.

“It’s about time for me to retire and for Elbit to have a young, fresh, energetic CEO,” said Ackerman, who will become vice chairman. “The current strategy we did together. We see the future the same way. He may change it (the strategy), but not in the coming year or two.”

Elbit will pay a quarterly dividend of 30 cents a share, unchanged from the third quarter.

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