"We'll maintain two-digit growth"
Elbit Systems CEO Joseph Ackerman assesses his market.
Uri Shuster 15 Nov 07 17:07
The impressive rise seen recently in the stock of Elbit Systems (Nasdaq: ESLT; TASE: ESLT) was probably less to do with anticipation of the exceptionally good third quarter results reported yesterday, and more to do with the realization that anyone who wants to carry on investing in stocks needs to expand the defensive element of the portfolio, a need which the company meets precisely. There was nothing unusual in Elbit Systems' financials, and no unpleasant surprises, which amounts to a privilege these days.
Company president and CEO Joseph Ackerman believes that the two-digit growth will be maintained in the coming years. "Once, if you were to ask me, I would say that the goal was high one-digit growth. Now, I allow myself to say low two-digits," says Ackerman, and explains, "The budgets of armies around the world have been growing at 3-4% annually in the past few years, and we are growing faster than the market, even though it certainly isn't easy. Our business is military electronics, and it makes no difference whether there's peace or war, there's always demand for the products. What's more, today armies buy fewer platforms and more systems, and that's exactly what we do. Therefore I estimate that in the next three to four years we'll maintain a two-digit growth rate. 2008 is more or less clear to us, and it will be better than 2007."
In Elbit Systems' field of activity, size is critical. Although the company is a bulldozer in local terms, as witness its almost unbelievable $4.55 billion orders backlog, it is small in comparison with similar companies overseas.
"The figures are very clear today, the customer seeks a solution from a single supplier, and to provide it we must make acquisitions and expand our range, and thereby also reduce costs, for example marketing costs, which a small company in this area finds hard to meet," Ackerman explains, and adds, "The Israeli scale is deceptive. We're still not even half the average size of defense companies around the world, and so we must persist with a strategy of mergers and acquisitions."
Nevertheless, Ackerman reckons that it will take time till the next acquisition. "In the short term we must digest the acquisition of Tadiran Communications and our other acquisitions. So I see 2008 as a year of integration, and not so much of acquisitions. At the same time, we're always on the lookout, and we won't pass up on acquisition opportunities."
Published by Globes [online], Israel business news - www.globes.co.il - on November 15, 2007