IMI Systems Lands $450M Munitions Deal, Reports 10 Percent Growth


RAMAT HASHARON, Israel – IMI Systems began 2017 with a seven-year supply deal from the Israeli Defense Ministry, which pledged to procure $450 million in munitions for armor and infantry forces.

The deal, announced Jan. 1 by the Israel MoD, won’t immediately impact the firm’s backlog; it is slated to begin in 2019 and extend through 2025, with annual orders averaging some $65 million over the course of the multiyear buy. Nevertheless, it was welcomed at IMI headquarters as yet another show of confidence in a state-owned company poised for privatization and growing at a rate of 10 percent annually since 2014.

“This multi-year deal highlights the confidence of MoD and the Israel Defense Forces (IDF) in the company’s battle-proven weapons systems,” said IMI President and Chief Executive Avi Felder. “We’re proud of our ability to supply the IDF and all our customers cost-effective solutions appropriate to their operational requirements.”

Felder noted that, on average, IMI’s domestic sales to MoD come close to 1 billion shekels ($260 million) each year – less than half of the $570 million in turnover for 2016. As of December 31, 2016, the firm’s backlog exceeded 8 billion shekels ($2.1 billion), Felder said.

“This latest agreement stems from MoD’s decision to assure continuity of strategic production lines as we transition to our new 50,000-dunam facility down south. It’s just a portion of the business we do annually with MoD,” Felder said. 

In its Jan. 1 announcement, MoD said its multiyear deal would enable the IDF to complete its resupply of stocks expended in the 2014 Gaza war and support Ground Force live-fire training for the coming decade. In parallel, it aims to assure “economic certainty” as the firm transfers production lines from its high-priced headquarters compound north of Tel Aviv to Ramat Beka in the Negev desert.

Under a privatization plan approved by the government in December 2013, IMI must complete its move to the Negev by 2022.  According to the MoD statement, Shmuel Tzuker, the ministry’s procurement chief,  insisted that the multiyear agreement extend through 2025, a full three years after the planned relocation, in order to fortify economic efficiencies at the new production facilities.

Felder noted that in recent years, the firm has revamped its portfolio to focus on the needs of urban battle and force-protective maneuvering warfare.  He cited the firm’s advanced 120-millimeter and 105-millimeter tank rounds of various types and a spectrum of precision artillery systems from ranges of 30 kilometers to beyond 300 kilometers. He also flagged the firm’s insensitive munition hand grenade and Iron Fist, an active protection system (APS) for armored vehicles, which is generating keen interest worldwide.

In parallel to the firm’s sales in Israel and around the world, IMI has entered into successful joint ventures and teaming agreements that are boosting its bottom line. “Cooperation with top-tier firms in the United States and around the world is a cornerstone of our growth strategy,” Felder said.

He added, “We’ve grown some 10 percent each year for the past three years, and we expect this trend to continue through 2017. Our goal for the coming year is $640 million in sales, about $70 million more than the $570 million we’re reporting for the year that just ended.”

The firm is partnered with Raytheon Missile Systems on a nearly $100 million, 60-month contract to provide precision extended range mortar (PERM) bombs to the US Marine Corps. Under the teaming agreement, nearly 40 percent of the work is performed by IMI in Israel.

Another partnership is with DRS Technologies to provide assault bridging systems to the US Army. In a recent interview, DRS Chairman and Chief Executive Bill Lynn said the team is looking at more than $400 million, if all options are exercised. “Our partnership with IMI is a great example of how we married IMI’s technology with our leadership position in the market, and it allowed us to beat a very strong incumbent and bring that technology over to the United States,” Lynn told Defense News.

And just last month, IMI reaped the fruits of yet another partnership, this time mating its Iron Fist active protection system (APS) with Sweden-based BAE Systems, producers of the Dutch CV90 infantry fighting vehicles. The Netherlands selected the BAE-IMI team for a verification program that could lead to outfitting the country’s troop carriers with the ability to automatically defend against RPGs, anti-tank missiles and other threats.

Once the test phase of the program is complete, the Dutch Ministry of Defence plans to enter a follow-on acquisition phase early next year, Hans de Goeij, project manager at the Netherlands Defence Material Organization, said in a Dec. 23 statement. “With Iron Fist, the Netherlands is expected to become the first NATO country with an Active Protection System of its kind on combat vehicles,” he said.

In parallel, IMI continues to work with General Dynamics Ordnance and Tactical Systems, its US partner for the firm’s Iron Fist APS. The two firms are engaged in parallel programs with the Pentagon to integrate Iron Fist on Bradley fighting vehicles and adapt the system for the US Army’s Modular Active Protection Systems (MAPS) program, an effort managed by the service’s Tank Automotive Research, Development and Engineering Center.

As for the actual sale of IMI, which was supposed to have taken place at the beginning of 2016, government and industry sources say the matter is still stuck in bureaucratic red tape.

Elbit Systems, Israel’s largest publically traded firm, has emerged as the sole source bidder, but authorities are assessing the privatization methodology of Ori Yogev, head of the Government Companies Authority, as well as anti-trust concerns expressed by Israel Aerospace Industries (IAI) and Rafael, Israel’s other two state-owned defense firms.

“Things are pretty much stalled now with regard to privatization, but we’re not focused on that. As far as we’re concerned, we already think and operate as if we were a privately-owned, non-government company,”  Felder said. “We’re results-oriented and focused like a laser on positioning ourselves properly in order to bring in the business.”

@opallrome

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