March 25, 2020 / 11:34 AM / 14 days ago

UPDATE 1-Israeli defence group Elbit boosts profit, sees limited virus impact

(Adds comments from CEO, CFO interview)

By Tova Cohen

TEL AVIV, March 25 (Reuters) - Israeli defence electronics group Elbit Systems reported higher fourth-quarter profit, boosted by acquisitions and growth in its legacy businesses, and said it had not so far been substantially impacted by the coronavirus outbreak.

The maker of drones, pilot helmet displays and cybersecurity systems on Wednesday reported fourth-quarter earnings of $2.47 per diluted share excluding one-time items, up from $1.96 a year earlier. Revenue rose to $1.32 billion from $1.08 billion.

In November 2018, Elbit bought IMI from Israel’s government for $500 million. In September 2019, it bought the night vision business of L3Harris Technologies for $350 million.

Shares in Elbit were up 3.6% in early afternoon trade.

“To date we have not experienced a material impact on our ongoing business from the COVID-19 pandemic,” said Chief Executive Bezhalel Machlis.

He pointed to a strong order backlog, which climbed to $10.03 billion at the end of 2019 from $9.4 billion at the end of 2018.

“Most of our planned revenues for this year come from this backlog and the same for next year and we are expecting the backlog to grow in the first quarter based on several contracts we got,” Machlis told Reuters.

Chief Financial Officer Joseph Gaspar said that if the crisis ends in the next several months, Elbit is optimistic regarding growth in 2020.

“If it goes on for a year or more then we will have to look at that again,” he said.

Elbit is deemed an “essential business” in Israel and its factories are open. Workers are split into two and sometimes three shifts for their safety, Machlis said, with the same true for its development centres.

The company has nearly 30 subsidiaries around the world, which are also operating “more or less” as usual.

“We are using special cargo planes to deliver goods to our customers,” Machlis said. He said earlier this week Elbit rented a plane from El Al to deliver products to a customer in India and on the return transported hundreds of stranded Israelis.

Although there is a risk that countries’ defence budgets will be shifted in the wake of the coronavirus outbreak, Machlis said Elbit’s homeland security and cybersecurity businesses are seeing growing demand.

Its overseas subsidiaries stand to benefit after the crisis when governments will increase spending to create jobs, he said.

Elbit declared a dividend of 44 cents per share for the fourth quarter, the same as the third quarter. (Reporting by Tova Cohen Editing by Steven Scheer and Jane Merriman)

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