Elbit Systems Awarded a Contract of Approximately $340 Million for the Supply of Ammunition to the Israeli Ministry of Defense

Rhea-AI Summary

Elbit Systems (NASDAQ: ESLT) has secured a significant contract worth approximately $340 million from the Israeli Ministry of Defense (IMOD) for the supply of ammunition. The contract, announced on August 1, 2024, will span over a 10-year period. As part of the agreement, Elbit Systems will establish a new manufacturing facility dedicated to producing the ammunition.

Bezhalel Machlis, President and CEO of Elbit Systems, expressed gratitude for the IMOD's trust and emphasized the company's commitment to expanding its production infrastructure and capabilities. He also highlighted Elbit Systems' ongoing efforts to develop, manufacture, and deliver top-tier, combat-proven technological solutions to customers in Israel and worldwide.

Positive

• Secured a $340 million contract with the Israeli Ministry of Defense
• Contract duration of 10 years, providing long-term revenue stability
• Expansion of production capabilities with a new manufacturing facility
• Strengthened relationship with a key government client

Negative

• None.

Financial Analyst

The $340 million contract awarded to Elbit Systems by the Israeli Ministry of Defense represents a significant business win for the company. This long-term agreement, spanning 10 years, provides a stable revenue stream and enhances Elbit's position in the defense sector. Here's why this deal is noteworthy:

• The contract's value equates to approximately $34 million per year, which could potentially boost Elbit's annual revenue by 1-2%, depending on their current financial standing.
• By establishing a new manufacturing facility, Elbit is expanding its production capabilities. This investment in infrastructure suggests confidence in future growth and may lead to economies of scale, potentially improving profit margins in the long run.
• The decade-long duration of the contract provides predictable cash flow, which is particularly valuable in the often cyclical defense industry. This stability could positively impact Elbit's credit rating and borrowing capacity.

However, investors should consider that defense contracts can be subject to political and budgetary pressures. The long-term nature of the deal, while beneficial, also exposes Elbit to potential risks such as cost overruns or changes in defense priorities over the next decade.

Overall, this contract strengthens Elbit's market position and demonstrates the company's ability to secure significant, long-term agreements with key customers. It's a positive indicator for the company's future growth prospects and operational stability.

Defense Industry Analyst

This contract signifies more than just a financial win for Elbit Systems; it underscores the company's strategic positioning in the evolving landscape of defense technology and manufacturing. Here are key insights for investors:

• The decision to establish a new manufacturing facility for ammunition production indicates a shift towards vertical integration. This move could potentially reduce Elbit's reliance on external suppliers and give the company greater control over its supply chain and product quality.
• The Israeli Ministry of Defense's choice of Elbit for this substantial contract suggests a high level of trust in the company's capabilities. This could lead to further contracts and partnerships, not only in Israel but potentially with other allied nations.
• The 10-year timeframe of the contract aligns with long-term defense planning cycles. It positions Elbit to be a key player in Israel's defense infrastructure for the foreseeable future, potentially leading to additional opportunities for system integration and upgrades.

Investors should note that this contract may also serve as a showcase for Elbit's manufacturing capabilities, potentially opening doors to similar contracts with other countries seeking to modernize their defense capabilities. However, it's important to consider the geopolitical implications of being a major defense contractor, as it can expose the company to scrutiny and potential controversies in international markets.

In conclusion, this contract not only boosts Elbit's financial outlook but also strengthens its strategic position in the global defense industry, potentially paving the way for future growth and expansion.

Manufacturing Operations Expert

The establishment of a new manufacturing facility for ammunition production is a significant development for Elbit Systems, with several implications for the company's operations and future prospects:

• Expanding manufacturing capabilities allows Elbit to diversify its product portfolio and potentially enter new market segments within the defense industry. This could lead to a more robust and resilient business model.
• The investment in a new facility suggests that Elbit anticipates continued demand for ammunition, not just from the Israeli Ministry of Defense but possibly from other customers as well. This could indicate a strategic move to position the company as a key supplier in the global ammunition market.
• Setting up a dedicated ammunition production line may lead to improved efficiency and cost-effectiveness in the long run. As production ramps up over the 10-year contract period, Elbit could benefit from economies of scale and learning curve effects, potentially increasing profit margins.

However, investors should be aware of the challenges associated with this expansion:

• The initial capital expenditure for the new facility could impact short-term profitability and cash flow. It's important to monitor how Elbit manages this investment and the timeline for the facility to become fully operational.
• Ammunition production requires strict quality control and safety measures. Elbit will need to ensure compliance with all relevant regulations and maintain high safety standards, which could add to operational costs.
• The company may face challenges in terms of workforce training and retention, as specialized skills are required for ammunition manufacturing.

Overall, this move demonstrates Elbit's commitment to vertical integration and long-term growth in the defense sector. If executed well, it could enhance the company's competitive position and open up new revenue streams beyond the current contract.

HAIFA, Israel, Aug. 1, 2024 /PRNewswire/ -- Elbit Systems Ltd. (NASDAQ: ESLT) (TASE: ESLT) ("Elbit Systems" or the "Company") announced today, that it was awarded a contract in an amount of approximately $340 million for the supply of ammunition to the Israeli Ministry of Defense (IMOD). The contract will be performed over a period of 10 years. Elbit Systems will establish a manufacturing facility to produce the ammunition.

Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems: "We continue to expand our production infrastructure and capabilities to support our customers. I thank the IMOD for the trust placed in our management and employees. Elbit Systems continues to develop, manufacture and deliver top-tier technological solutions and products that are combat proven, to our customers in Israel and worldwide."

About Elbit Systems

Elbit Systems is a leading global defense technology company, delivering advanced solutions for a secure and safer world. Elbit Systems develops, manufactures, integrates and sustains a range of next-generation solutions across multiple domains.

Driven by its agile, collaborative culture, and leveraging Israel's technology ecosystem, Elbit Systems enables customers to address rapidly evolving battlefield challenges and overcome threats.

Elbit Systems employs over 19,000 people in dozens of countries across five continents. The Company reported as of March 31, 2024 approximately $1.6 billion in revenues and an order backlog of $20.4 billion.

For additional information, visit: https://elbitsystems.com, follow us on Twitter or visit our official Facebook, Youtube and LinkedIn Channels.

Company Contact: 

Dr. Yaacov (Kobi) Kagan, Executive VP - CFO
Tel:  +972-77-2946663
kobi.kagan@elbitsystems.com 

Dr. David Ravia, Investor Relations
Tel: +972-77-2947169
david.ravia@elbitsystems.com

Dalia Bodinger, VP, Communication & Brand
Tel: 972-77-2947602
dalia.bodinger@elbitsystems.com

This press release may contain forward–looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Israeli Securities Law, 1968) regarding Elbit Systems Ltd. and/or its subsidiaries (collectively the Company), to the extent such statements do not relate to historical or current facts. Forward-looking statements are based on management's current expectations, estimates, projections and assumptions about future events. Forward–looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions about the Company, which are difficult to predict, including projections of the Company's future financial results, its anticipated growth strategies and anticipated trends in its business.  Therefore, actual future results, performance and trends may differ materially from these forward–looking statements due to a variety of factors, including, without limitation: scope and length of customer contracts; governmental regulations and approvals; changes in governmental budgeting priorities; general market, political and economic conditions in the countries in which the Company operates or sells, including Israel and the United States, among others, including the duration and scope of the current war in Israel, and the potential impact on our operations; changes in global health and macro-economic conditions; differences in anticipated and actual program performance, including the ability to perform under long-term fixed-price contracts; changes in the competitive environment; and the outcome of legal and/or regulatory proceedings. The factors listed above are not all-inclusive, and further information is contained in Elbit Systems Ltd.'s latest annual report on Form 20-F, which is on file with the U.S. Securities and Exchange Commission. All forward–looking statements speak only as of the date of this release. Although the Company believes the expectations reflected in the forward-looking statements contained herein are reasonable, it cannot guarantee future results, level of activity, performance or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The Company does not undertake to update its forward-looking statements.

Elbit Systems Ltd., its logo, brand, product, service and process names appearing in this release are the trademarks or service marks of Elbit Systems Ltd. or its affiliated companies.  All other brand, product, service and process names appearing are the trademarks of their respective holders.  Reference to or use of a product, service or process other than those of Elbit Systems Ltd. does not imply recommendation, approval, affiliation or sponsorship of that product, service or process by Elbit Systems Ltd. Nothing contained herein shall be construed as conferring by implication, estoppel or otherwise any license or right under any patent, copyright, trademark or other intellectual property right of Elbit Systems Ltd. or any third party, except as expressly granted herein.

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SOURCE Elbit Systems Ltd.

FAQ

What is the value of Elbit Systems' new contract with the Israeli Ministry of Defense?

Elbit Systems (ESLT) has been awarded a contract worth approximately $340 million for the supply of ammunition to the Israeli Ministry of Defense.

How long will Elbit Systems' ammunition supply contract with IMOD last?

The contract between Elbit Systems (ESLT) and the Israeli Ministry of Defense for ammunition supply will be performed over a period of 10 years.

What new facility will Elbit Systems establish as part of the IMOD contract?

As part of the $340 million contract with the Israeli Ministry of Defense, Elbit Systems (ESLT) will establish a new manufacturing facility to produce the ammunition.

When did Elbit Systems announce the new ammunition supply contract with IMOD?

Elbit Systems (ESLT) announced the new $340 million ammunition supply contract with the Israeli Ministry of Defense on August 1, 2024.