Elbit Systems Q3 profit up as defense budgets grow
Defense electronics firm Elbit Systems reported higher third-quarter net profit on Tuesday and said its backlog of orders has expanded due to growing defense budgets in its target markets.
The maker of drones, pilot helmet displays and cyber security systems said it earned $1.57 per diluted share excluding one-time items in the three-month period, up from $1.46 a year earlier. Revenue rose to $800.7 million from $780.8 million.
Elbit’s order backlog climbed to $7.64 billion at the end of September from $6.84 billion a year earlier. It said about 73% of the backlog were orders from abroad.
“The fact that our backlog grew by 12% and the fact that we see growing demand for our products and systems is a very good indication for continuation of growth in revenues and profits,” Chief Executive Bezhalel Machlis told Reuters.
“Combining that with improving efficiencies, I have no doubt that the company will continue to grow in all parameters.”
He said a process begun a few years ago to reduce duplications, combine business units and centralize procurement activities is bearing fruit by increasing profit margins.
The backlog has been boosted by ongoing increases in defense budgets, “which we have been able to capitalize on in many of our target markets,” Machlis said.
Budgets have increased in the United States, Elbit’s biggest market, as well as in Europe, where “there is demand to find solutions for terrorist threats.”
Tensions around North and South Korea as well as China have boosted defense demand in Asia, while countries such as India see defense spending as a way to grow their economy.
The market in Latin America has stagnated, mainly due to falling oil and gas prices, though there is some recent improvement in this region, Machlis said.
Elbit’s land systems activities in particular posted strong growth in the quarter, with revenue jumping to $121 million from $31.8 million.
For many years the United States, with its “no boots on the ground” policy, focused on its air force and navy, but budgets are now growing for ground operations. In addition to advanced artillery defences and tank upgrades, Elbit provides border surveillance systems for homeland security.
Elbit declared a dividend of 44 cents for the third quarter, unchanged from the second quarter.