Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) subsidiary Elta Systems has warned against the material damage that is liable to be caused its finances by the Ministry of Defense's decision last week not to renew the company's export license for the airborne intelligence system sold to the Turkish Air Force.
In a notice to the TASE today, IAI said that Elta would ask the Ministry of Defense for compensation for the damage liable to be caused it by the non-renewal of the export licenses. It added that it would discuss the matter with the ministry immediately in order to reach a settlement. IAI said, "At this stage, there is no estimate of the amount of damage that will result from the cancellation. This damage is liable to be material to IAI's financial results."
The original deal was signed in 2009 by Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) subsidiary El-Op Electro-Optical Systems and IAI subsidiary Elta with the Turkish Air Force. The companies undertook to supply $140 million worth of advanced LOROP (Long Range Oblique Photography) systems, carried by specialized pods beneath combat jets. El-Op had the larger share of the project, and Elta estimates its share of the deal at $55 million.
"Globes'" website was the first to report on Thursday that the Ministry of Defense had decided not to renew the export licenses for the deal, following a situation analysis by the defense establishment and due to the ongoing crisis between Israel and Turkey.
On Thursday, Elbit Systems notified the TASE about the Ministry of Defense's decision, and said that it had opened talks with the Ministry of Defense director general Udi Shani on a compensation settlement. The company added, "The damage may have a material impact on the company's financial results."
Elbit Systems' share price rose 0.9% by early afternoon on the TASE today to NIS 159.70, after rising 0.3% on Nasdaq on Friday to $42.08, giving a market cap of $1.8 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on December 25, 2011
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