Bet Shemesh Engines (TASE: BSEN), controlled by the Bronicki family is leveraging its agreement with German company MTU Aero Engines. Beit Shemesh Engines has a seven-year agreement to supply jet engine parts. The agreement includes $15 million worth of disks and $35 million worth of blades. The disks are designed for PW306 and PW545 engines used in fourteen-seat executive jets. Pratt and Whitney of Canada manufactures the engines. MTU’s annual revenue turnover totals €1.8 billion.
Sale of the blades includes $10 million in previous orders by MTU due for delivery by 2006. These orders were joined to current orders, however, because the price has been raised, owing to higher prices for raw materials.
The blades are designed for V2500 engines jointly manufactured by Pratt and Whitney, General Electric (NYSE: GE), and other companies. The blades are installed mostly in short-haul planes. Delivery of the blades will begin in 2005, while supply of the disks will begin only in 2007.
Up until now, Beit Shemesh Engines’ business with MTU has involved mostly blades; MTU’s purchase of disks marks an upgrade in relations between the two companies. Beit Shemesh Engines and MTU are also partners in the manufacture of jet engines for the Falcon 7x executive jet.
Under this agreement, signed last August, Beit Shemesh Engines will share the risk of investing in the engine, and will receive 2.2% of revenue from the sale of the complete engines and spare parts.
Beit Shemesh Engines believes that investment in the joint project will total $10 million over the next four years, while projected sales are $100 million, spread over 35 years. According to its current orders, Beit Shemesh Engines’ orders backlog is $41 million for 2005, and $49 million a year, starting in 2006. A $50 million order over seven years therefore has both financial and strategic significance for the company.
Published by Globes [online], Israel business news - www.globes.co.il - on December 26, 2004