- Growth in sales to about USD 985 million, an increase of about 10.1% compared to Q2 2018. The growth in sales was evidenced in all of the Company’s divisions
- Increase in EBITDA to about USD 96 million, representing about 10% of sales, compared with about USD 70 million in Q2 2018
- Increase in operating income to about USD 48 million, representing about 4.9% of sales, compared with about USD 30 million in Q2 2018
- Increase in net income to about USD 36 million, compared with about USD 13 million in Q2 2018
- Growth in export sales of about 13% to about USD 747 million, representing about 76% of total Company sales compared to Q2 2018
- Positive cash flows from operating activities totaling about USD 73 million
- Order backlog of USD 13.3 billion
August 26, 2019- Israel Aerospace Industries Ltd. (“the Company” or “IAI”), Israel’s largest national military and civilian security defence company, issues its consolidated financial statements for the six and three months ended June 30, 2019.
At the close of the first half of 2019, IAI records a growth in sales of about 11.7% to USD 1,986 million, as opposed to USD 1,778 million in H1 2018. IAI’s order backlog amounts to USD 13.3 billion as of June 2019 and the net income in the first half of the year increased to about USD 50 million compared to net income of about USD 27 million in the first half of 2018. EBITDA in H1 2019 totaled USD 165 million, compared to USD 145 million in H1 2018. The growth in sales compared to the first half of last year reflects a growth in the activities of all of the Company’s business divisions, including an increase in exports.
Nimrod Sheffer, President& CEO of IAI: “The results of this quarter echo the Company’s new business strategy and corporate wide enhanced efforts. The Company’s large order backlog, appropriate management focus and the outstanding human capital at IAI enable us to continue the growth trend. The increase in revenues in all of the Company’s groups mainly arises from improved sales of attack and defence weapons, radar and area defence systems. This growth allows management to pursue its corporate efficiency measures, cope with growing international competition and exercise sales efforts in the domestic market – Israel. IAI’s superior technological capabilities, which once again manifested themselves in one of the most intricate defence operations ever attempted by the State of Israel in the series of successful Arrow-3 missile tests in Alaska, are only the tip of the iceberg in demonstrating the Company’s advanced developments. IAI will continue to lead the defence industry in Israel and remain one of Israel’s largest exporters.”
Main results in Q2 2019
The Company’s sales in Q2 2019 amounted to USD 985 million compared with USD 895 million in Q2 2018, an increase of about 10.1%. The increase in sales in Q2 2019 compared to Q2 of last year is mainly a result of the increase in the sales of all of the Company’s divisions in view of the major boost in order backlog in recent years.
Sales for export in Q2 2019 totaled USD 747 million, accounting for 76% of sales (USD 238 million to Israel, representing 24% of sales), compared with 74% in Q2 2018 (USD 236 million to Israel, representing 26% of sales).
Sales to the military market in Q2 2019 totaled about USD 711 million (about 72% of sales), compared with about USD 639 million (about 71% of sales) in Q2 2018, an increase of about USD 72 million.
Sales to the civilian market in Q2 2019 totaled about USD 274 million (about 28% of sales), compared with about USD 256 million (about 29% of sales) in Q2 2018.
Gross profit in Q2 2019 amounted to USD 145 million (14.7% of sales) compared with USD 148 million (16.5% of sales) in Q2 2018.
Research and development expenses, net in Q2 2019 totaled about USD 37 million, compared with about USD 45 million in Q2 2018 (about 3.8% and about 5% of sales, respectively). This represents a temporary decrease due to not exercising specific R&D investment budgets.
Expenses in respect of early retirement of employees – in Q2 2019, the Company recorded income from updating the provision for early retirement of employees totaling about USD 1 million, similarly to the corresponding quarter of 2018.
Operating income in Q2 2019 amounted to USD 48 million (4.9% of sales) compared with USD 30 million (3.4% of sales) in Q2 2018.
EBITDA in Q2 2019 amounted to USD 96 million compared with USD 70 million in Q2 2018.
Net financial income/expenses – in Q2 2019, the Company recorded net financial income of USD 5 million compared with net financial expenses of USD 13 million in Q2 2018.
The Company’s share of earnings of associates – in Q2 2019, the Company recorded a negligible amount in respect of its share of earnings of associates as opposed to income of about USD 2 million in Q2 2018.
Net tax expenses – in Q2 2019, the Company recorded net tax expenses of about USD 17 million compared with net tax expenses of about USD 6 million in Q2 2018. The increase in tax expenses between the quarters mostly arises from the improvement in the Company’s profits. The Company’s income is subject to the ordinary corporate tax rate in Israel.
Net income in Q2 2019 amounted to about USD 36 million (3.7% of sales), compared with about USD 13 million (1.5% of sales) in Q2 2018.
The order backlog at the end of Q2 2019 amounted to about USD 13.3 billion compared to about USD 13.5 billion at the end of 2018. 79% of the order backlog is held for sale to foreign customers that are widely geographically dispersed, based on a large variety of products and secures about 3.5 years of operation.
Positive cash flows from operating activities in Q2 2019 amounted to USD 73 million compared with positive cash flows from operating activities of USD 104 million in Q2 2018.
Material events in Q2 2019 through the financial statement publication date
Engagement with foreign company after the reporting date – on July 25, 2019, the Company signed a series of agreements with a foreign unrelated company in the aviation industry for financing the development of licenses for conversion of a specific type of passenger jet to freighter (cargo) configuration and (after obtaining the licenses) for conversion of the foreign company’s aircraft to freighter aircraft by the Company at a fixed minimum quota. The duration of the agreement (including the development and conversion period) is estimated at 5-6 years for expected proceeds of USD 380-400 million (given the minimum number of aircraft to be converted for the foreign company determined in the agreement). The agreement also grants the foreign company an option to order the conversion of additional aircraft by the Company.
(*) Operating income before financial expenses (income), net and tax expenses, with the addition of depreciation and amortization.
