Europe becomes Elbit Systems' main sales region

Elbit Systems products  credit: Tali Bogdanovsky
Elbit Systems products credit: Tali Bogdanovsky

The largest of Elbit Systems' recent contracts is with Australia, but business in Europe is booming, and the company is expanding to meet demand.

In the past two years, the world, particularly the West, has been rearming, and Elbit Systems (TASE: ESLT; Nasdaq: ESLT) has been a big beneficiary. Just in the past couple of weeks, Elbit Systems has reported two huge contracts, one in Europe and the other in Australia, totaling $900 million. The new contracts join a double-digit number of deals around the world (mainly in Europe) that Elbit Systems has reported in the past six months.

Altogether, between August 2023 and February 2024, the contracts reported by the company amount to almost $2.3 billion. In addition, Elbit Systems has won several weighty contracts from Israel’s Ministry of Defense, arising from the Swords of Iron war, but it has not disclosed their value. At the end of the third quarter of 2023, Elbit Systems had an orders backlog of $16.6 billion, 39% of which was for delivery in 2023-2024, and 75% of which was for export.

Can Elbit meet the demand?

The war that broke out on October 7 has meant a great deal of work for Elbit Systems, and at the beginning it had to find creative solutions to meet the demand, with many of its employees drafted into the IDF reserves. Elbit Systems has hired hundreds of people since the outbreak of war, and has even brought back over 100 pensioners to the production lines.

Will Elbit Systems manage to fulfil its orders backlog from around the world at the same time as meeting demand in Israel? As far as manpower is concerned, it appears that a large proportion of the reservists at Elbit have been released, while the company continues to hire new workers. The company said that it was "prepared, and continues to act to ensure operational continuity with minimum harm, if any, to immediate delivery times to customers."

It added: "The contracts recently signed and reported are designated for delivery over a period of several years. The company is prepared to meet delivery times for a growing range of customers around the world. Elbit’s broad and high-quality portfolio together with localization at dozens of sites around the world allows flexibility and adaptation to changing needs. Elbit has hired, and is continuing to hire, hundreds of employees."

Europe becomes main market

The most recent contract announced by Elbit Systems was, as mentioned, from Australia, where the company will supply equipment for Redback Infantry Fighting Vehicles over five years for $600 million. A large majority of the company’s recent orders is, however, from Europe. Following the Russian invasion of Ukraine and the war that is now entering its third year, Elbit Systems has seen growing revenue. In the first three quarters of 2023, revenue from Europe grew by 54.8%, to $1.3 billion. Europe thus became main revenue source, accounting for 30.6% of the total, up from 21.4% in the corresponding period of 2022.

Among the European contracts that Elbit Systems has announced in the past few months is one for the supply of its Iron Fist (active protection system) to a European customer for $109 million; a contract as main integrator for the Swedish army’s digitization program, for $170 million; and a contract for the supply of systems for armored vehicles of a European customer for $300 million. Elbit Systems generally does not name the countries with which it signs deals, at the request of the countries themselves. It would appear that many countries prefer that others will not know what they ordered and when they will receive it.

Outside of Europe, Israel, and Australia, Elbit Systems has announced one contract in the US in recent months. At the end of November, it won a deal worth up to $500 million to supply night vision equipment to the US Marine Corps. In the first three quarters of 2023, Elbit’s revenue from North America totaled over $1 billion, representing 24.1% of total revenue. In Israel, revenue was $730 million in the period. Last year, the company experienced delays in payments from the Ministry of Defense, but its CEO Bezhalel Machlis said when the third quarter financials were released that there was an absolute commitment to settling all debts in the fourth quarter.

Elbit Systems is traded on both the Tel Aviv Stock Exchange and on Nasdaq, with a market cap of $9.9 billion. Its share price has risen 34% over the past year, but it has still not returned to the peak it reached in the summer of 2022. The largest shareholder in the company is Michael "Mikey" Federmann, with a 44% stake worth $4.37 billion.

Elbit Systems recently called a shareholders meeting to approve a pay rise for Machlis. His current monthly salary is NIS 243,000, and the company seeks to raise it to NIS 300,000 ($81,000) from April. The salaries of vice presidents at the company will be up to NIS 200,000. The company also seeks to raise the maximum annual bonus payable to Machlis from $2 million to $3 million, and to allocate to him 150,000 options.

Published by Globes, Israel business news - - on March 3, 2024.

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

Elbit Systems products  credit: Tali Bogdanovsky
Elbit Systems products credit: Tali Bogdanovsky
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