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UPDATE 2-Elbit Systems sees better 2012 after Q4 loss
March 14, 2012 / 8:28 AM / 6 years ago

UPDATE 2-Elbit Systems sees better 2012 after Q4 loss

* Q4 loss/share $0.31 vs $1.01 EPS

* Q4 revenue rises 5 percent to $841.9 mln

* Sees better profit margins in 2012

* Shares up 2.9 pct in Tel Aviv

By Tova Cohen

TEL AVIV, March 14 (Reuters) - Israeli defence electronics firm Elbit Systems expects profitability to improve in 2012 after it posted a loss in the fourth quarter of 2011 due to the ending of a contract in Turkey.

Joseph Ackerman, Elbit’s president and chief executive, said the company should see improvement in gross and operating margins in 2012 due to cost-cutting measures and a strong presence in key emerging markets countries.

“Some of the costs that occurred in 2011 will not be repeated in 2012 -- the costs of demonstrations (for clients) and the costs of doing business, of building models -- so this is why I feel we will be more efficient in 2012,” Ackerman told Reuters following a conference with analysts.

Elbit, Israel’s largest publicly traded defence firm, expects to end 2012 with 500 fewer employees from a workforce of 13,000 but this will be done through natural attrition, rather than layoffs.

Ackerman also sees more business opportunities in the pipeline this year than last, adding: “I‘m not saying we will win more than last year but the potential is there.”

“I would say we will be disappointed if revenue does not grow in 2012,” he said.

Elbit lost 31 cents per diluted share in the fourth quarter, compared with earnings of $1.01 a share a year ago. Excluding one-time factors, Elbit earned $1.41 per diluted share compared with $1.64 a share a year earlier.

Last month, Elbit projected a drop in fourth-quarter profit after the Israeli government did not renew its authorisation to complete a $90 million contract with Turkey’s air force for the supply of surveillance systems. Ties between once-close allies Israel and Turkey have deteriorated in recent years.

Elbit is in discussions with Israel’s Ministry of Defence regarding the company’s request for compensation. Ackerman said he does not believe there will be new defence deals for Israeli companies in Turkey in the coming years.

REVENUE UP

Quarterly revenue grew five percent to $841.9 million, above analysts’ expectations in a Reuters poll of $819 million.

Leumi Capital Markets analyst Ella Fried said the results were relatively good and pointed to a rise in the backlog of orders but added that weakness in the electro-optics business was a concern.

“The question is whether moderate growth can be obtained together with efficiency measures in coming years,” she said.

Its shares were up 2.9 percent to 140.8 shekels in late Tel Aviv trade.

Chief Financial Officer Joseph Gaspar said profit in the quarter was also hurt by a mix of programmes sold in the quarter at profit margins that were uncharacteristically low.

“There was some pressure on prices because of competition and also some of our acquisitions had residual programmes with slightly lower profitability, which we hope we will be able to improve,” he said.

Gross profit margin was 26 percent, compared with 29-30 percent seen in recent years. Gaspar believe margins will fall somewhere in between in 2012.

Elbit, which specialises in electronics, intelligence technology such as unmanned air vehicles, command and control and training systems, is also targeting cyber warfare as a growth engine. Elbit’s systems are aimed at governments, armed forces, banks and critical infrastructure.

Elbit’s backlog of orders rose to $5.528 billion by the end of 2011 from $5.446 billion in 2010.

Elbit declared a dividend of 30 cents a share.

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