Strong Currency drives Elbit to offshore production

Above: Elbit’s self-propelled howitzer gun system, ATMOS

Elbit Systems announced 20% growth in sales during Q3 2021, to $1.36 billion, as compared to $1.13 billion in the third quarter of 2020. Gross profit in the third quarter amounted to $371 million (27% of revenues), compared to $302 million in Q3 2020. Elbit is a major Israeli defense and homeland security solutions provider with a broad portfolio of airborne, land and naval systems and products. Backlog orders as of September 30, 2021 was approximately $13.6 billion.

Last month it was awarded a contract to operate Texan T-6C training aircrafts for the UK Air Force, a $100 million contract to provide the Royal Navy with new Electronic Warfare capabilities, a $74 million order to supply airborne munitions for the Korean Air Force and a $106 million to supply its newly SIGMA fully automatic self-propelled howitzer gun systems, to a country in Asia-Pacific.

The problem with the Israeli shekel

But during the conference call following the quarterly results report, it was clear the Elbit in very concerned about the currency situation. Joseph Gaspar, Elbit’s  Chief Financial Officer, brought the issue to the table: “We continue to implement mitigation plans to limit the impact of the strengthening of the Israeli shekel. In the short-term, this includes the adoption of a rolling hedge policy and efficiency measures. Over the longer term, we plan to expand our manufacturing footprint in high quality lower cost countries to better balance our currency exposure and reduce risk.”

Bezhalel Machlis, Elbit’s President and CEO, added some color: “We have dozens of companies all around the world, in Brazil, in the U.S., in the U.K., in Germany, in India and many other places. So we are taking advantage of the positions we have in these markets and we are expanding our facilities there. It helps us first to be more local, to be more crafted and to do more jobs on the ground. And secondly, also to hedge some of our activities, which we do in Israel and other facilities. So all together, we have a long-term plan to improve the profitability of the company.”

Production of howitzer guns in The US

In November 2021, Elbit Systems of America (ESA) announced plans to establish a new 135,000 square foot facility in Charleston, South Carolina, for combat vehicle assembly and integration center of excellence. “The new facility is part of Elbit strategy to expand our engineering and manufacturing capability in the U.S. This facility will create around 300 new jobs. We expect operations in the facility to begin by the third quarter of 2022, to support contracts ESA received from the Israeli Ministry of Defense for the supply of self-propelled howitzer gun systems.”