Highest net income ever recorded by the Company in the first nine months of a fiscal year – a 37% growth to about USD 112 million, surpassing the entire annual income for 2019. The Company’s sales in the three quarters of 2020 exceeded USD 3 billion – the highest nine-month period sales ever recorded in Company history. Record-breaking gross profit in the nine months ended September 30, 2020 and increase in operating income, net income and EBITDA. The growth in the Military Groups offset the Coronavirus effect on the Aviation Group’s operations
- Sales: an increase of 2.3% in sales volume to about USD 3,084 million in the Reporting Period, compared with about USD 3,016 million in the corresponding period of 2019, the highest sales ever recorded in the first nine months of the year in Company history. The Company’s sales in Q3 2020 amounted to about USD 1,006 million compared with about USD 1,030 million in Q3 2019, a decrease of about 2.3% despite the Coronavirus crisis.Most notably, an increase of about 15% in the sales of the Military Groups(*) amounting to about USD 2,571 million in the Reporting Period compared with about USD 2,234 million in the corresponding period of last year. A decrease in the sales of Aviation Group(*) in the Reporting Period to about USD 877 million compared with about USD 1,083 million in the corresponding period of last year.
- Net income: increase of about 37% in net income to about USD 112 million in the nine months ended September 30, 2020 compared with about USD 82 million in the corresponding period of last year, the highest net income ever recorded in the first nine months of the year in Company history, exceeding the entire annual net income for all of 2019, which was about USD 90 million. Net income in Q3 2020 amounted to about USD 30 million compared with about USD 32 million in Q3 2019.An increase of about 20% in the net income of the Military Groups(*) in the Reporting Period to about USD 200 million compared with about USD 166 million in the corresponding period of last year. The net loss recorded by Aviation Group(*)in the nine months ended September 30, 2020 amounted to about USD 36 million compared with a loss of about USD 7 million in the corresponding period of last year.
- EBITDA: grew by 17.8% to about USD 311 million in the Reporting Period compared with about USD 264 million in the corresponding period of last year. EBITDA in Q3 2020 amounted to about USD 88 million compared with about USD 99 million in Q3 2019.
- Gross profit: about 9% growth in gross profit in the Reporting Period to about USD 465 million (about 15% of sales) compared with about USD 427 million in the corresponding period of 2019 (about 14% of sales). Gross profit in Q3 2020 amounted to about USD 132 million (about 13% of sales) as opposed to about USD 160 million in Q3 2019 (about 16% of sales).An increase of about 15% in the gross profit of the Military Groups(*) in the nine months ended September 30, 2020 to about USD 434 million compared with about USD 379 million in the corresponding period of last year. The gross profit of Aviation Group(*) in the nine months ended September 30, 2020 amounted to about USD 42 million compared with about USD 63 million in the corresponding period of last year.
- Operating income: 48% growth in operating income in the Reporting Period to about USD 163 million (about 5.3% of sales) compared with operating income of about USD 110 million (about 3.6% of sales) in the corresponding period of 2019. Operating income in Q3 2020 amounted to about USD 36 million (about 3.6% of sales) compared with operating income of about USD 42 million in Q3 2019 (about 4.1% of sales).An increase of about 26% in the operating income of the Military Groups(*) in the nine months ended September 30, 2020 to about USD 230 million compared with about USD 183 million in the corresponding period of last year. The operating loss of Aviation Group(*) in the nine months ended September 30, 2020 amounted to about USD 18 million compared with operating income of about USD 10 million in the corresponding period of last year.
- The Company’s order backlog approximates USD 12.7 billion, representing about 3.2 years of operation. The Company’s free cash flows total about USD 1 billion. The Company has negative cash flows from operating activities totaling about USD 188 million arising mainly from a delay in payment receivable from a major customer which does not impair the Company’s ability to meet its future obligations.
Harel Locker, IAI’s Chairman of the Board: “This is the seventh consecutive quarter that the Company boasts record-breaking operating results despite the ongoing Coronavirus crisis. The boost in sales and the improvement in profits and in other financial results reflect the strict implementation of the Company’s business strategy by management and the employees in the last three years and achievement of the targets set out in its business plan. The enduring Coronavirus pandemic has mostly impacted the Company’s operations in the Aviation Group, but IAI benefits from a diversity of products and state-of-the-art technology and operates in some 100 countries around the globe. This geographical diversification allows us to cope with the challenges posed by the Coronavirus crisis and positions the Company at an excellent stance for dealing with future developments in the global crisis, for pursuing its business success and for continuing to contribute to the State of Israel’s security and economy.”
Israel Aerospace Industries Ltd., a leader in the Israeli military and commercial homeland defence and aerospace markets, issues its consolidated financial statements for the nine and three months ended September 30, 2020 (“the Reporting Period” and “Q3 2020”, respectively).
The Company’s sales in the Reporting Period grew to about USD 3,084 million compared with about USD 3,016 million in the corresponding period of 2019, an increase of about USD 68 million. The growth in sales mainly derives from the increased sales in the Systems Missiles & Space Group and in the ELTA Group.
The sales of the Military Groups(*) in the Reporting Period increased by about 15% to USD 2,571 million compared with USD 2,234 million in the corresponding period of last year. The sales of the Aviation Group(*) in the Reporting Period decreased to USD 877 million compared with USD 1,083 million in the corresponding period of last year – a decrease of USD 206 million.
The Company’s sales in Q3 2020 amounted to about USD 1,006 million compared with about USD 1,030 million in Q3 2019.
The sales of the Military Groups(*)in Q3 2020 increased to about USD 865 million compared with about USD 786 million in the corresponding quarter of last year, an increase of USD 79 million. The sales of the Aviation Group(*)in Q3 2020 decreased by some 27% to about USD 265 million compared with about USD 362 million in the corresponding quarter of last year – a decrease of USD 97 million.
The decrease in sales in Q3 2020 mainly arises from the decrease in sales of Aviation Group and Military Aircraft Group, partly offset by the increased sales of the Systems Missiles & Space Group and the ELTA Group.
Sales for export in the Reporting Period accounted for 71% of sales totaling about USD 2,203 million (about USD 881 million, representing 29% of sales, to Israel), compared with 74% in the corresponding period of 2019, totaling about USD 2,227 million (about USD 789 million, representing 26% of sales, to Israel). Sales for export in Q3 2020 accounted for 70% of sales totaling about USD 706 million (about USD 300 million, representing 30% of sales, to Israel), compared with 73% in Q3 2019, totaling about USD 747 million (about USD 283 million, representing 27% of sales, to Israel).
Gross profit in the Reporting Period amounted to about USD 465 million (about 15% of sales), compared with about USD 427 million in the corresponding period of 2019 (about 14% of sales) – an increase of USD 38 million. The increase in gross profit stems from the increased sales of the Systems Missiles & Space Group and the ELTA Group and the increase in the profits of the Military Aircraft Group. Gross profit in Q3 2020 amounted to about USD 132 million (about 13% of sales), compared with about USD 160 million in Q3 2019 (about 16% of sales). The decrease in gross profit in Q3 2020 mostly arises from the reduced sales and profits of Aviation Group.
The gross profit of the Military Groups(*)in the Reporting Period increased by 15% to about USD 434 million compared with about USD 379 million in the corresponding period of last year, an increase of USD 55 million. The gross profit of Aviation Group(*)in the Reporting Period decreased to about USD 42 million compared with about USD 63 million in the corresponding period of last year. The gross profit of the Military Groups(*)in Q3 2020 amounted to about USD 142 million compared with about USD 140 million in the corresponding quarter of last year. The gross loss of Aviation Group(*)in Q3 2020 amounted to about USD 4 million compared with a gross profit of about USD 22 million in the corresponding quarter of last year.
Operating income in the Reporting Period amounted to about USD 163 million (about 5.3% of sales), compared with operating income of about USD 110 million in the corresponding period of 2019 (about 3.6% of sales), an increase of USD 53 million. Operating income in Q3 2020 amounted to about USD 36 million (about 3.6% of sales), compared with operating income of about USD 42 million in Q3 2019 (about 4.1% of sales).
The operating income of the Military Groups(*)in the Reporting Period increased by some 26% to about USD 230 million compared with about USD 183 million in the corresponding period of last year, an increase of USD 47 million. The operating loss of Aviation Group(*)in the Reporting Period amounted to about USD 18 million compared with operating income of about USD 10 million in the corresponding period of last year. The operating income of the Military Groups(*)in Q3 2020 increased by about 4% to about USD 73 million compared with about USD 70 million in the corresponding quarter of last year, an increase of USD 3 million. The operating loss of Aviation Group(*)in Q3 2020 amounted to about USD 22 million compared with operating income of about USD 2 million in the corresponding quarter of last year.
Net income in the Reporting Period increased by 37% to about USD 112 million (about 3.6% of sales), compared with net income of about USD 82 million (about 2.7% of sales) in the corresponding period of 2019 – an increase of USD 30 million. Net income in Q3 2020 amounted to about USD 30 million (about 3% of sales), compared with net income of about USD 32 million (about 3.1% of sales) in Q3 2019.
The net income of the Military Groups(*)in the Reporting Period increased by some 20% to about USD 200 million compared with about USD 166 million in the corresponding period of last year, an increase of USD 34 million. The net loss of Aviation Group(*)in the Reporting Period amounted to about USD 36 million compared with a loss of about USD 7 million in the corresponding period of last year. The net income of the Military Groups(*)in Q3 2020 increased by some 8% to about USD 70 million compared with about USD 65 million in the corresponding quarter of last year. The net loss of Aviation Group(*)in Q3 2020 amounted to about USD 28 million compared with net income in a negligible amount in the corresponding quarter of last year.
EBITDA in the Reporting Period grew by about 17.8% to about USD 311 million (about 10.1% of sales), compared with about USD 264 million (about 8.8% of sales) in the corresponding period of 2019. EBITDA in Q3 2020 amounted to about USD 88 million (about 8.7% of sales), compared with about USD 99 million (about 9.6% of sales) in Q3 2019.
In the Reporting Period, the Company recorded net financial expenses of about USD 14 million, compared with financial expenses of about USD 3 million in the corresponding period of 2019. In Q3 2020, the Company recorded net financial expenses of about USD 1 million, compared with net financial expenses of about USD 7 million in Q3 2019.
In-house research and development expenses in the Reporting Period amounted to about USD 117 million, compared with about USD 116 million in the corresponding period of 2019 (accounting for about 3.8% and about 3.8% of sales, respectively). In-house research and development expenses in Q3 2020 amounted to about USD 46 million, compared with about USD 45 million in Q3 2019 (accounting for about 4.6% and about 4.4% of sales, respectively).
In the Reporting Period, the Company recorded net tax expenses of about USD 38 million compared with tax expenses of about USD 28 million in the corresponding period of 2019. In Q3 2020, the Company recorded net tax expenses of about USD 7 million compared with tax expenses of about USD 5 million in Q3 2019. The increase in tax expenses compared to the corresponding periods of last year mostly arises from the improvement in the Company’s profits for tax purposes. The Company’s income is subject to the ordinary corporate tax rate in Israel – 23%, and it is not entitled to any tax benefits pursuant to the Israeli Law for the Encouragement of Capital Investments, 1959 as it is a wholly-owned government company. The sale of any interests in the Company, even at a miniscule rate, to a non-government party will render the Company eligible for a reduced corporate income tax rate as per said Law.
The order backlog in the Reporting Period amounted to about USD 12.7 billion, compared to about USD 13.4 billion at the end of 2019. 79% of the order backlog is held for sale to foreign customers that are widely geographically dispersed, based on a large variety of projects, and secures about 3.2 years of operation given the current sales volumes.
Negative cash flows from operating activities in the Reporting Period amounted to about USD 188 million compared with negative cash flows from operating activities of about USD 263 million in the corresponding period of 2019. The negative cash flows from operating activities in Q3 2020 amounted to about USD 125 million compared with negative cash flows from operating activities of about USD 245 million in Q3 2019.
(*) The data of the divisions’ sales, gross profit, operating income and net income (loss) consist of inter-divisionary activities and are identical to the data included in the note on business segments in the consolidated financial statements.
Condensed balance sheet data (USD in millions)
Condensed profit and loss data (USD in millions)
