Bet Shemesh Engines Ltd. (TASE: BSEN) reported this morning that it had signed a long-term framework agreement to supply US company Pratt & Whitney with jet engine parts for $45 million (NIS 175 million), which might be expanded to $65 million (NIS 250 million).
The jet engine part manufacture and overhaul company is controlled by Ishay Davidi's FIMI Opportunity Funds. Bet Shemesh Engines said that the contract will be expanded "in accordance with the parties' readiness and availability." The company's share price rose this afternoon.
The company added, "the contract details the supply of jet engine spare parts for three different projects," including the supply of five compressor discs for an engine installed in F-15 and F-16s totaling $36 million and a rear hub for a F-35 (stealth fighter) engine totaling $9 million. Bet Shemesh Engines will also provide a turbine disc for an Airbus A320 engine, "contingent on Pratt &Whitney's readiness and talks between the parties," by the end of 2025, for a further $20 million. As for this final item, the company said, "The client announced an engineering modification and Bet Shemesh Engines awaits change schematics. This new design could have a direct impact on the component's price and its volume in the contract."
On the way to a contract in France
This is the second contract reported by the Israeli company in the past few months, after its mid-November report on "reaching an arrangement to renew the long-term framework agreement with France's Safran Group unit Snecma for jet engine parts production, totaling $17.5 million (NIS 65 million)," by December 2021. The signing of an agreement between the parties is expected soon.
In early November, Bet Shemesh Engines' orders backlog totaled $200 million. Results for the first nine months of 2016 saw that the company's revenue rise 9% to $63 million, while operating and gross results also improved, leading net profit to jump 23% to $7 million.
Bet Shemesh Engines operates in two sectors: manufacturing engines and parts. The company attributes increased revenue in January-September to improvement in parts, including "revenue for products whose manufacturing was discontinued following the client's request;" as for improved profits, they said that it is "mainly due to the high-profit product mix," as well as profit from the partnership it participated in, in the past years.
Last May, FIMI completed the acquisition of Len Blavatnik's Clal Industries' 42% stake in Bet Shemesh Engines for NIS 125 million, reflecting a market cap of NIS 300 million, which was then a 6% discount on its market value. The next day the company's share price rose 16%; since the beginning of the year, it has jumped 55%, to a market cap of NIS 420 million.
Clal Industries sold its stake after conflicts in relations with Bet Shemesh Engines CEO Avner Shaham over the past few years, and after the parties had searched for ways of ending their partnership. A short time after the completion of the deal with FIMI, Shaham started pursuing the sale of his 25.5% company stake, currently worth NIS 105 million, to financial institutions, but a deal is yet to be finalized.
Published by Globes [online], Israel business news - www.globes-online.com - on December 19, 2016
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