Israeli Defense-Homeland security

[midastouch017]

Transfer to US depresses body armor co FMS profit

The company predicts that the US factory will begin production during the first quarter of 2006.

Golan Fridenfeld 28 Nov 05 17:49

Anyone reading the financial report for the third quarter of 2005 published by FMS Enterprises Migun Ltd. (TASE: FBRT), controlled by CEO Daniel Blum, was undoubtedly surprised by its downward trend in its results. After all, this is a company whose annual results have shown steady improvement over the last two years.
The financial report for the third quarter shows that FMS’s turnover fell compared with both the preceding quarter and with the corresponding quarter of 2004. The same was true for the company’s operating and net profits.

There is an explanation, actually a good one, that places FMS’s results in the proper perspective. Nonetheless, a long time will probably pass until it becomes possible to talk about a new trend in the results of the maker of ballistic armor materials and fabrics for personal, vehicle and aircraft armor.

In late September, FMS announced the establishment of a plant in the US, on land and in structures bought for $2 million in June. FMS set up a fully-owned subsidiary for this purpose. A production line set up in Israel in 2005 at a cost of $2.5 million will be moved to the US factory.

FMS predicts that the US factory will begin regular production during the first quarter of 2006, although this does not depend on the company, but on the US regulator of products for the US Army. FMS adds that the US factory will enable the company to make products for the US Army, which it could not do from outside the US. FMS predicts that sales to the US Army could significantly boost sales, although it could not quantify its projected profits.

FMS posted NIS 92.2 million in revenue for the third quarter, compared with NIS 97.2 million for the preceding quarter, and NIS 99 million for the corresponding quarter of 2004. The reason for the decline was the transfer of a production line from the company’s factory in Petah Tikva to the US, which prevented output during the dismantling, move, and reassembly, and until the company obtains permission to resume production at the new site.

FMS posted a net profit of NIS 23.5 million for the third quarter, 9.5% less than for the preceding quarter, and 16% less than for the corresponding quarter of last year.

Another factor affecting FMS’s third quarter results was a change in US federal standards for personal body armor for police forces. The change in standards is attributed to deliveries of faulty flack jackets made from zylon, which failed ballistic tests.

What is the connection to FMS? None at all, because FMS never used zylon in its products. Nevertheless, US security forces, the end users of FMS’s products, are postponing some procurements until the new standards are published.

Published by Globes [online], Israel business news -
www.globes.co.il - on November 28, 2005

http://www.globes.co.il/serveen/globes/DocView.asp?did=1000033962

Regards,

Dubi