Since the appointment at the beginning of 2006 of Itzhak Nissan as president and CEO of Israel Aerospace Industries (IAI), the company’s finances have undergone a radical improvement–a fact underlined by a massively oversubscribed public bond issue concluded earlier this month. Finalized on June 7, the bond issue generated a demand 87 times greater than the $250 million offered, reflecting the excellence of recent profit, sales and backlog figures.

On his arrival in office, Nissan instigated wide-ranging management and business culture changes. Fifteen months later the figures showed dramatic improvement: FY06 net profit was $130 million as opposed to the FY05 figure of $2 million; 2007’s first-quarter pretax profit was $60 million compared with $24 million for the same period in 2006; sales for 2006 were $2.8 billion, up around 20 percent over the previous year; and first-quarter sales for 2007 were 37 percent up on 2006 figures. Finally, backlog orders stood at $7.2 billion at year-end 2006, compared with $6.3 billion at the end of 2005.

Talking exclusively to Aviation International News, IAI chairman of the board Yair Shamir explained the reasons behind the bond issue: “The main reason was to make IAI a public company, but it also generated $250 million. We are experiencing rapid growth, and to support it we need capital…and going to the banks can be expensive. Uniquely for Israel the bond issue was raised in U.S. dollars. Our income is in dollars, so we have no hedging issues.”

Yair Shamir went on to discuss the company’s direction. At present, IAI’s business is split 65/35 in favor of defense, but the aim is to bring the nondefense sector up so that the split will be 50/50. To increase the civil side means that acquisitions and partnerships are being pursued. IAI was established to become a source of core technology to keep Israel independent, but now it has to leverage that technology to sell to a wider market. The Israeli ministry of defense now accounts for just 15 to 18 percent of sales. Exports can be difficult because of government restrictions, even more so if U.S. technology is also involved. IAI always approaches the government first before any potential sale progresses much beyond initial contact stage.

In terms of development, Shamir points to the key areas where IAI has a significant advantage and limited competition–“engines for growth,” as he calls them. These are areas where only a handful of companies are involved and include satellites, large unmanned air vehicles and radar/antimissile systems. By focusing on these areas IAI can compete as number one or two, with a higher chance of success. The company’s spectacular growth in recent times now allows it “to look the big guys in the eye.”

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