November 26, 2019 / 10:11 AM / 14 days ago

UPDATE 1-Israeli defence firm Elbit Systems profit dips on rising costs

(Adds CFO comments, details, share reaction)

By Tova Cohen

TEL AVIV, Nov 26 (Reuters) - Israeli defence electronics firm Elbit Systems reported lower quarterly net profit despite increased revenue, weighed down by higher financing, marketing and research expenses and acquisition costs.

The maker of drones, pilot helmet displays and cyber security systems said on Tuesday it earned $1.33 per diluted share excluding one-time items in the third quarter, down from $1.57 a year earlier. Revenue rose to $1.1 billion from $895.2 million.

Elbit's shares were down 2.7% in morning trade in Tel Aviv, but up 29% in the past year.

Higher expenses in the quarter reflect the inclusion of IMI, a manufacturer of military systems known for being an early maker of the Uzi submachine gun, that Elbit acquired last November from Israel's government for $500 million.

At the end of the quarter Elbit bought Harris Corp's night vision business for $350 million, its third acquisition since 2018. The financial results of the new business will impact Elbit's top and bottom line in the fourth quarter.

"The integration of recent acquisitions is progressing as expected and we continue to explore additional opportunities to extract revenue and cost synergies," said Chief Executive Bezhalel Machlis.

Chief Financial Officer Joseph Gaspar said IMI was losing money when it was acquired and has now reached break-even on an operating basis.

"Hopefully in several years we will bring them to the level of Elbit," Gaspar said.

Elbit expects its revenue and profit will grow in 2020.

"The United States is growing, Europe is growing, Asia Pacific will probably on an absolute basis grow as well," he said. "We are less optimistic regarding Latin America...It's difficult to plan growth in that area at least for the coming years."

Elbit's order backlog climbed to $9.8 billion at the end of September from $8.1 billion a year ago.

"We do encounter a situation that actually is very positive from the point of view of defence budgets, definitely in the western world. The U.S. is leading that, Europe is following. We see many opportunities," Gaspar said.

Elbit declared a dividend of 44 cents per share for the third quarter, the same as the second quarter. (Additional reporting by Ari Rabinovitch, editing by Louise Heavens)

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