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Israel’s Defense Ministry has been delaying payments on its debt to defense companies.
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Israeli Aerospace Industries, whose subsidiary Elta was congratulated by so many in and out of Israel’s government for its work on the radar at the heart of the anti-rocket Iron Dome system, has announced that it hasn’t been paid for its highly praised work.
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The checks from Israel’s Defense Ministry have stopped coming last April, according to a company statement IAI sent the Securities Authority and the Tel Aviv Stock Exchange (TASE), and the debt has now reached $249 million.
IAI CEO Yossi Weiss, who issued the statement, said that “starting in April, 2014, against the background of cuts in the defense budget, the Defense Ministry has been delaying payments on its debt to defense companies in general, including IAI.”
According to Weiss, IAI never consented to these delays, and as a result has been forced to delay payment of a variety of fees to Defense. But he did not consider any risk in eventually collecting the amounts Elta is owed.
Weiss estimated IAI’s cash flow as down to $1.35 billion, compared with $1.7 billion in the first quarter of 2014. The drop represents a combination of lack of government payment and IAI’s payments of bonds totalling $150 million.
According to Globes, despite IAI sales totaling close to $1 billion in the first quarter of 2014, the company’s net profit reached only some $9 million, compared with $19 million in the first quarter of 2013.
The Defense Ministry has issued a response, saying it reached a debt layout agreement with IAI, to manage the budget cuts.
Meanwhile, IAI reported this week a new deal to provide electronic systems to a foreign military to the tune of $1.2 billion. According to the company negotiations have reached an advanced stage, and should it succeed, the contract for the supply of these systems will be spread over 5 years.
Recently there have been reports of IAI bidding for a $1.4 billion deal to provide transport and refueling aircraft to the South Korean Air Force. IAI is competing against giants Airbus and Boeing. The South Korean Defense Ministry is expected to decide on the bids by the end of 2014.
