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Reported this morning on the results of the second quarter of 2020, when in the shadow of the Corona crisis, revenues were still quite stable compared to the corresponding quarter – an increase of about 1.5% – but the backlog of orders increased by about $ 1 billion. “I am very pleased with the results. Especially with the improvement in operating profitability and cash flow. We have proven that we are coping well with the effects of the corona crisis,” he said. Bezalel (Muddy) Maklis, President and CEO of Elbit Systems in an interview with BizPortal After the reports are published. “We are seeing a significant increase in activity in the US. The results of the second quarter illustrate the resilience of our businesses during this challenging period, both operationally and logistically. ”
Growth in the second quarter was quite low, what was the main factor?
“First, while the Corona crisis did not materially hurt the results, it is clear that if it were not for the crisis we would have presented stronger results in the top line. I think our backlog provides clarity as to our future revenues.”
You showed an increase of about $ 1 billion in the order backlog in the quarter, from which areas did the increase mainly come?
“We saw an increase in sales throughout the breadth of activity, there is no specific area that had an unusual increase. But note that our backlog amounted to about $ 10.8 billion as of the end of the quarter. We sold more than in the same period last year.”
Still, what are your key growth engines for the future?
“We are currently concentrating most of our efforts on developing intelligent intelligence systems, in this area there is an integration of several areas of our activity. These are systems that collect the intelligence information, analyze it and respond accordingly, without the need for human intervention. As complementary products to these systems, Closing fire circles, ie attack systems that will be activated by artificial intelligence systems. In addition, we see the ‘Sky Shield’ system as a growth engine. The world leader. ”
“Recently we have also expanded our combat simulations. We are developing the capabilities of gathering intelligence from space using satellites and focusing on developing a powerful aerial laser, which will be used both as a means of defense (against missiles, Katyushas, etc.) but also as an offensive means.”
How does the corona crisis affect your activity?
“We carry out a series of actions to protect the safety of our employees, such as transferring workers to work from home as much as possible, in order to maintain business continuity and our supply chain. Due to the various limitations, there has been a need to support our suppliers, from financial support to goods We have a number of activities that leverage our technological capabilities to help hospital and other emergency teams protect our communities from the effects of the epidemic. These activities continue even today. On the plus side, we can see that in some countries we are getting more orders, with the goal of creating jobs, but In the long run, what the budgets of countries will look like in the future, it is difficult for us to assess at this stage. ”
Some companies have not yet recovered from the crisis, this could create buying opportunities. More M&A deals still on the horizon? Or are you hoarding cash?
“We see the current situation as an opportunity to create business opportunities, the company is certainly prepared to make additional M&A deals, and we continue to explore business opportunities, despite the crisis.”
What major new technologies are currently in development?
“As mentioned, we are currently focusing on the development of powerful laser systems, artificial intelligence systems and robotics.”
You also operate in the cyber market, what does this market look like at the moment?
“One of the effects of the Corona crisis has been the relocation of many companies to work from home, which has significantly increased the need for cyber attack protection systems. We are focusing on this market, where we see significant demand and investing resources there accordingly.”
“The effects of the corona will not be missed on defense budgets”
In response to the publication of Elbit Systems’ written reports Liran Lublin, Director of Research Department, IBI Investment House “The report showed trends similar to previous quarters that included low growth versus a corresponding quarter in the top row (as a result of the Harris consolidation), and lower-than-expected gross profit margins. On the positive side, there was a slight increase in operating profit and cash flow from operating activities.
“Bottom line, Elbit publishes an unimpressive report (the Corona certainly constitutes extenuating circumstances) and lower than expected. The low profitability rates in the negative organic growth quarter explain the rapprochement between the multipliers in which Elbit trades and those of the competitors.
“In addition, we continue to argue that the effects of the corona on Elbit’s target markets will not miss the defense budgets and it is difficult to assume growth in numbers similar to those to which we have become accustomed in previous quarters.