May 16, 2017 / 9:16 AM / 3 months ago

UPDATE 1-Israeli defence firm Elbit Systems Q1 profit, revenue up

(Adds CEO comments, details, share reaction)

By Tova Cohen

TEL AVIV, May 16 (Reuters) - Israeli defence electronics firm Elbit Systems reported slightly higher quarterly net profit, boosted by a rise in revenue that was partly offset by increased research and marketing spending aimed at boosting future revenue growth.

Elbit, Israel's largest publicly traded defence firm, said on Tuesday it earned $1.21 per diluted share excluding one-time items in the first quarter, up from $1.20 a year earlier.

The maker of drones, pilot helmet displays and cyber security systems said revenue grew to $749.2 million from $721.2 million.

"In today's geopolitical environment, we are seeing a trend of larger defence spending in many of our target markets, especially in the electronic defence sphere," Chief Executive Bezhalel Machlis said.

Tensions in the South China Sea, Russia's intervention in Syria and policies being pushed by U.S. President Donald Trump have been a boon for the defence sector, Machlis said.

Elbit increased its R&D and marketing spending to capitalise on these growing opportunities, he told Reuters, adding the company had now reached an "appropriate" level for such spending.

For the rest of the year, he said, "we expect to see continued growth in earnings, more than in the first quarter. The trend is clear."

Research and development spending rose to $58.4 million in the first quarter from $56 million. Marketing expenses rose 8 percent while financial expenses increased to $8.6 million from $1.7 million as the year-earlier quarter benefited from a gain from exchange rate differences.

In the United States, Elbit works with the Department of Defense and the Department of Homeland Security.

Elbit has a contract for its border surveillance technology to electronically secure the U.S.-Mexican border in Arizona state.

"I believe it will be expanded" both within Arizona as well as to other states, Machlis said.

The only geographic region suffering right now is Latin America, he noted.

Elbit's order backlog rose to $7.07 billion at the end of March from $6.78 billion a year earlier.

Elbit declared a dividend of 44 cents per share, unchanged from the fourth quarter.

Shares of Elbit's Tel Aviv-listed shares were down 1.25 percent at midday. (Editing by Steven Scheer and Mark Potter)

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