Elbit CEO: Some investors bowed to political pressure

Elbit Systems president and CEO Bezhalel Makhlis credit: Assaf Shilo Israel Sun
Elbit Systems president and CEO Bezhalel Makhlis credit: Assaf Shilo Israel Sun

Despite growth in orders, revenue and profit in the first half of 2024, the Israeli defense technology company’s share price has fallen since the start of the year.

Demand for the defense technology products of Elbit Systems Ltd. (Nasdaq: ESLT; TASE:ESLT) can be seen in the backlog of orders, revenue and increase in profit. Elbit ended the second quarter of 2024 with a $21.1 billion orders backlog, up 31% from the corresponding quarter of 2023. Revenue in the second quarter was $1.6 billion, up 11.8% from the corresponding quarter while revenue in the first half of 2024 was $3.2 billion, up a similar percentage from the first half of last year.

Geopolitical tensions in various regions of the world (Middle East, Russia-Ukraine, and concerns about China) have led to countries increasing defense budgets, which has benefitted defense companies. Elbit’s increase in revenues is spread across all the regions in which it operates, although orders from Israel’s Ministry of Defense has seen the company’s sales in Israel jump from 17.6% of total revenue in the first half of 2023 to 28.2% in the first half of 2024. Elbit’s sales in Israel rose 79% in the first half of 2024 to $896 million.

Elbit reported GAAP net profit of $78.4 million in the second quarter of 2024, up 26% from the corresponding quarter of 2023. Non-GAAP net profit was $92.7 million in the second quarter of 2024, up 26% from the corresponding quarter of 2023.

Elbit Systems CEO: New UAV plant to open in Q4

Elbit Systems president and CEO Bezhalel Machlis said, "The continuous high demand for our products and solutions reinforces our position as industry leaders. Our long-term investments in technologies, research and development in collaboration with our key customers, and the expansion of our manufacturing capabilities, enable us to meet our commitments to our customers and to drive the continued growth and focus on profitability of the company, in alignment with our strategic goals."

Machlis told "Globes" that if in the past Elbit had said it would reach sales of $7 billion in 2026, now it believes that it will reach this goal next year. He said, "The company is very successful, the growth is great, and the operational effort is very great - people work very hard, some of our sites operate three shifts and we are investing quite alot in new production sites, such as a new UAV factory that will open in the fourth quarter."

How far are you expanding production capacity? Do you lack capacity to meet demand today?

"If we had more production capacity, we would be selling more today. We will increase capacity soon, through activity in Ramat Beka (near Beersheva), which will begin to open gradually in the fourth quarter, which is significant and dramatic, and there is also the UAV plant that will open. These are new infrastructures that we are building. Today, we are making the most of what we have by adding shifts, and we have hired thousands of people in operations and engineering. We invest not only in Israel, but also in England, Germany, the US and other places, and have taken in many new employees, in order to create a platform for the long term."

Is it easier to hire employees today than it was in previous years?

"We are hiring in Israel and around the world. Hiring in Israel at least is relatively uncomplicated, because people feel great significance in doing things at Elbit, and in contributing to the defense system and the IDF in dealing with the challenges. We make a direct contribution to the IDF's success in battle. Another thing - in the field of engineering, the current state of investment in startups in Israel creates a situation where it is easier for us to hire employees in the sector."

Elbit, which is controlled by Michael Federmann's Federmann Enterprises (44%), is traded on Nasdaq and the Tel Aviv Stock Exchange (TASE) at a market cap of $8.8 billion. While stocks of the major defense companies have risen since the start of the year by 13% and over the past year by 21% (according to Fidelity data based on the S&P sectoral indices), Elbit’s share price is down 10% and 7%, respectively, over these periods.

How do you explain the share’s weakness?

"You have to understand that the war has also affected us negatively. Some investors, fortunately only a few, experienced political pressures of some sort and decided to sell, for example the Canadian fund that sold a large number of shares and pushed the share price down. In the end I think the trend stopped. The company's results speak for themselves, and those who invest in Elbit are investing for the long term and believe in an increase in sales, backlog and profit. From a strategic point of view, we are marching forward to continue growth in these parameters, and growth is not a one-off event but a trend."

The Canadian investor that sold a substantial stake in Elbit at the beginning of 2024 was Bank of Nova Scotia, which held a 2.5% stake at the end of the first quarter of 2024, down from 4.2% at the end of last year. This followed protests and petitions against the bank over its holdings in Elbit Systems. "Globes" found that Bank of Nova Scotia further reduced its position in Elbit to 1.4% during the second quarter of 2024.

Published by Globes, Israel business news - en.globes.co.il - on August 14, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Elbit Systems president and CEO Bezhalel Makhlis credit: Assaf Shilo Israel Sun
Elbit Systems president and CEO Bezhalel Makhlis credit: Assaf Shilo Israel Sun
Shekel versus US dollar  credit: Tali Bogdanovsky US market slide shakes shekel

The shekel weakened significantly against both the US dollar and the euro at the opening of foreign exchange trading today.

Arik Faingold credit: Nati Levi Israeli autonomous frontend co AutonomyAI raises $4m

Led by Arik Faingold, the founder of cybersecurity unicorn Pentera, AutonomyAI offers a platform that learns and understands the full organizational context and generates code that can be deployed directly to the production environment.

British Airways aircraft  credit: Shutterstock/Jarek Kilian Tel Aviv - London fares to fall as British Airways resumes flights

From June there will be 20-32 weekly flights operated on the popular Tel Aviv - London route by foreign airlines - British Airways, Wizz Air and easyJet.

Partner Partner forms int'l business diivision

The division will be headed by former Bezeq International VP Global Business Nissan Arieh.

Caesarstone kitchen credit: Caesarstone Caesarstone bucks Nasdaq as tariffs boost potential

The Israeli quartz countertop manufacturer company has fallen on hard times due to Chinese rivalry but tariffs could boost its revenue.

ZIM ship credit: ZIM Trump's tariffs torpedo ZIM's share price

ZIM's share price fell 16.4% on Wall Street on Thursday and a further 7.2% on Friday, closing with a market cap of $1.5 billion, wiping out all its gains in 2025.

Israeli apartments Credit: Shutterstock Apartments sold and rented

A selection of recent real estate deals in Israel in Tel Aviv, Holon, Rehovot, Kiryat Tivon, Shlomi and Beersheva.

THAAD anti missile system credit: The US Army Ralph Scott Wikimedia US deploys more THAAD, Patriot batteries in Israel - report

Amid rising regional tensions the US is bolstering Israel's air defense, Saudi state-owned TV channel Al Arabiya reports.

Tel Aviv Stock Exchange credit: Shutterstock TASE tumbles in Wall Street's wake

Dual-listed stocks have again been hard hit, but the banks are also down sharply.

Donald Trump and Benjamin Netanyahu credit: Avi Ohayon Netanyahu due in Washington to discuss tariffs

According to news website Axios, Prime Minister Benjamin Netanyahu will be the first leader to meet President Trump after the latter's announcement of sweeping import tariffs.

Yoni Assia CEO eToro Credit: PR eToro defers IPO amid market turmoil

The online trading platform had planned to begin meetings with investors this week.

Minister of Finance Bezalel Smotrich credit: Shlomi Yosef Smotrich meets wrong man in Washington

Minister of Finance Bezalel Smotrich tried to persuade Secretary of the Treasury Scott Bessent to soften the tariff blow on Israel - only Bessent isn't responsible for the matter.

Unframe founders credit: Yossi Yarom Israeli AI enterprise platform co Unframe raises $50m

Unframe’s turnkey AI solutions enable companies to solve any enterprise AI use case at scale with fully functional, customized AI solutions for businesses in a matter of hours, rather than months.

Combatica credit: Combatica Combatica launches next-gen VR AI training platform

The Israeli company's virtual reality platform includes 50 AI generated scenarios, seven maps and even situations for operating night vision.

Shekel credit: Shutterstock Vladirina 32 Shekel volatility after US tariffs announcement

The shekel is weakening sharply against the euro, which is gaining following the unveiling of Donald Trump's tariffs plan.

Minister of Finance Bezalel Smotrich credit: Noam Moskovitz Knesset Spokesperson Treasury assesses potential damage to Israel's US exports

Israel will be charged a higher tariff on its exports to the US - its biggest export customer - than Turkey and the UAE.

Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018