Israel's Elbit Systems benefits from rising U.S. defence spending

TEL AVIV (Reuters) - Israeli defense firm Elbit Systems ESLT.TA reported a 4 percent rise in third-quarter net profit on Tuesday, boosted by higher sales in North America and Asia as well as its acquisition of U.S.-based Universal Avionics Systems Corp.

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

Chief Executive Officer Bezhalel Machlis said increased U.S. defense spending was creating opportunities in commercial and defense avionics, ground force systems and homeland security along the U.S.-Mexican border.

Elbit makes drones, pilot helmet displays and cyber security systems.

Machlis also said Elbit’s acquisition of state-owned rival IMI Systems is expected to be completed in the coming days after the transaction received the approval of Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon on Monday.

Elbit ESLT.O said in June it would buy IMI for up to $522 million.

Machlis noted that most of IMI’s revenue comes from Israel while Elbit’s main markets are abroad.

“Long-term, combining the portfolios will improve our offering to the market,” he told Reuters.

Elbit said it earned $1.50 per diluted share in the July-September period, up from $1.44 a year earlier. Revenue rose to $895.2 million from $800.7 million.

Elbit’s order backlog climbed to $8.1 billion at the end of September from $7.6 billion a year earlier.

“Geographically, the U.S. is leading in the growth. Some of that relates to the acquisition (of Universal Avionics Systems), most of that is organic,” Chief Financial Officer Joseph Gaspar said.

He noted that Elbit benefits from having a large American subsidiary that performs most of its U.S. work.

While Elbit does not provide forecasts, Gaspar noted the company’s backlog had grown by $500 million in the past year.

“That is the best indicator of what can happen at the top line. We saw a similar situation a year ago when our backlog grew significantly,” he said.

Elbit declared a dividend of 44 cents per share for the third quarter, unchanged from the second quarter.

Reporting by Tova Cohen; Editing by Steven Scheer and Susan Fenton