IAI posts heavy 2018 loss despite revenue rise

Nimrod Sheffer Photo: PR

Revenue rose 5% last year to $3.7 billion but Israel Aerospace Industries lost $47 million.

Despite a 5% improvement in annual revenue to $3.7 billion, a rise in expenses, largely to do with pay, led Israel Aerospace Industries (IAI) to a loss in 2018. The company posted a net loss of $47 million for last year, after a net profit of $79 million in 2017.

The loss in the fourth quarter of 2018 was $49 million, and followed a loss of $21 million in the third quarter. These losses were partly offset by profits in the first two quarters.

IAI attributes the growth in its revenue mainly to the activity of the Bedek aircraft maintenance, upgrade and conversion division, and of the Systems Missiles and Space Group, which it says reflects substantial growth in orders going back to 2016.

Gross profit, however, fell 8% in 2018 to $494 million, and also fell as a percentage of sales, mainly because of higher employee compensation expenses resulting from a strengthening of the US dollar against the shekel.

Besides the rise in the employee compensation expense, IAI reports that several events had a negative impact on its results, among them a write-down of stock at its Elta subsidiary and "a loss resulting from the diminution in value of a non-tangible asset."

IAI also mentions "a commitment to a payment stipulated in a memorandum of understanding signed with Boeing, in the Bedek division, and a provision for doubtful debts in the Systems Missiles and Space Group." The company also suffered from higher expenses for early retirement of employees.

The result was a 90% plunge in operating profit to just $12 million, less than 0.5% of sales.

IAI's orders backlog grew by $2.3 billion in 2018 to $13.5 billion at the end of the year.

IAI CEO Nimrod Sheffer, who took up the post last September, said, "The loss in the year arises from several non-recurring events, including the provision for the early retirement of employees, write-off of inventory due to the prolongation of a pre-sale process of a material contract and the impairment of an intangible asset in the refueling conversion operation.

"In the second half of 2018, the company's management completed the design of an updated business strategy and continued executing a series of significant measures consisting of material business and corporate restructuring. Sheffer added.

Among these measures are the consolidation of IAI's civilian divisions into a single division, because of the heavy losses incurred in recent years.

Published by Globes, Israel business news - en.globes.co.il - on March 28, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Nimrod Sheffer Photo: PR
Nimrod Sheffer Photo: PR
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