IAI presents improving profitability

Nimrod Sheffer Photo: PR

Israel Aerospace Industries tripled its first quarter operating profit, although profit remains low in relation to sales.

The profit of Israel Aerospace Industries (IAI) grew in the first quarter of 2020 to $34 million, from $14 million in the first quarter of 2019, the company's financials, release today, show.

IAI's operating profit tripled to $61 million from $20 million in the corresponding quarter. Nevertheless, profit remains low in relation to sales, which totaled $18 billion in the first quarter, a record for the state-owned company.

IAI CEO Nimrod Sheffer said, "The first quarter results are a continuation of the business turnaround and implementation of the new strategy carried out by the company, which already manifested themselves in the record results for 2019. In the first quarter of 2020, we surpassed the corresponding quarter of 2019 in most business measures."

On the effect of the coronavirus crisis (which broke out in Israel in the final two weeks of the reporting period), Sheffer said, "At present, the company knows of no cancellations of contracts or substantial delays resulting from the coronavirus pandemic, and it continues to work with its customers to find solutions to disruptions, such as to the supply chain, that have arisen because of the pandemic."

Sheffer added that "IAI is examining its forecasts relating to future contracts, chiefly in civilian aviation, in the light of the global consequences in this field."

Sheffer also pointed out that IAI reached second place this year in the ranking of the best companies to work for in Israel.

Exports accounted for 71% of IAI's sales in the first quarter, reaching $724 million. Military sales were $782 million in the quarter, or 77% of the total, which compares with $736 million, or 74% of total sales, in the corresponding quarter.

Gross profit improved to $170 million, 16.7% of sales, in the first quarter of 2020 from $122 million, or 12.2% of sales, in the corresponding quarter of 2019. IAI attributes the improvement to sales by its Systems Missiles and Space group, and to higher sales and gross margins in its Elta defense electronics unit.

Operating profit in the first quarter of 2020 was $61 million, 6% of sales, which compares with $20 million, 2% of sales, in the corresponding quarter. The rise in operating profit derives from the higher gross profit, partially offset by higher spending on research and development.

At the end of the first quarter of 2020, IAI had an orders backlog of $13.2 billion, which compares with $13.4 billion at the end of 2019. 79% of the backlog represents orders from overseas customers, with a wide geographical spread. The backlog is made up of a wide variety of projects, and ensures 3.2 years of activity at the current rate of sales.

Published by Globes, Israel business news - en.globes.co.il - on May 27, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Nimrod Sheffer Photo: PR
Nimrod Sheffer Photo: PR
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