Israeli defense firm Elbit eyes U.S. market for further growth

JERUSALEM (Reuters) - Israeli defense electronics company Elbit Systems ESLT.TAESLT.O reported higher quarterly profit on Thursday, driven by its acquisition of rival IMI, and said it would continue to target the U.S. market to help fuel growth.

FILE PHOTO: Logo of Israeli defence electronics firm Elbit Systems is seen at their offices in Haifa, Israel February 26, 2017. REUTERS/Baz Ratner

Elbit - a maker of drones, pilot helmet displays and cyber security systems - last November bought IMI from the Israeli government for $500 million as well as the U.S.’s Universal Avionics Systems for $120 million in April 2018

Elbit is in the process of buying Harris Corp's LHX.N night vision business for $350 million. It would be Elbit's third acquisition since 2018 and provide at least $160 million of annual revenue as the firm seeks to bolster its portfolio.

Chief Executive Bezhalel Machlis expects to complete the deal by early fourth quarter pending various approvals.

“These acquisitions will strengthen our position in the United States,” he told Reuters. “I am putting an emphasis on our activity in the U.S. market. It will improve our position in this market in the commercial avionics business and in the night vision business in the United States.”

In the past few years, Elbit’s revenue in the United States, the world’s largest market for defense spending, has grown steadily and has reached 28% of total sales.

Revenue, of which 80% is outside of Israel, rose to $1.06 billion in the second quarter from $892.2 million a year earlier. Machlis said in addition to Elbit’s acquisitions, organic growth was also strong.

He said IMI was already profitable and has added tens of millions of dollars of international contracts since Elbit took over the company, which had largely been a supplier in Israel.

IMI, a manufacturer of military systems best known for being an early maker of the Uzi submachine gun, is expected to add revenue of at least $500 million this year.

“We see a lot of interest in IMI’s portfolio,” he said.

Elbit earned $1.46 per diluted share excluding one-time items in the quarter, up from $1.43 a year earlier.

Elbit’s order backlog climbed to $9.8 billion at the end of June compared with $8.1 billion a year ago. Some 60% of the backlog is for orders outside of Israel, with more than half of the backlog slated to be performed in the second half of 2019 and in 2020.

Machlis said Europe, including Britain and the Netherlands, and Australia were also important growth markets for Elbit.

“We see significant growth in revenue and profit this year as well in the future. This is mainly because of international markets,” he said, adding that with a strong balance sheet, the company would continue its strategy of looking for acquisitions.

Elbit’s shares were up 1.7% in afternoon trading in Tel Aviv.

The company declared a dividend of 44 cents per share for the second quarter, the same as the first quarter.

Reporting by Steven Scheer; Editing by Jeffrey Heller and David Evans