The Baran Group, Israel's largest engineering firm, presented its 2001 financial results yesterday, saying it was satisfied with the year's performance but concerned about the future.
"I am pleased with the results because we reached the goals we set ourselves in terms of growth, revenue and operating profit. However, we look with some worry at 2002," said Baran's CEO and chairman Meir Dor.
Last year began inauspiciously with the announcement of the cessation of an installation contract with satellite company Yes - news which saw Baran's shares sink by 15 percent in one day on the Tel Aviv Stock Exchange. This was followed by a dispute with the satellite firm that went to court but eventually was settled out of court. Toward the end of the year, the company saw its hopes of a quick entry into the U.S. market dashed, meaning the company lost out on a potential $100 million in projects.
Dor said most of Baran's problems in 2001 stemmed from Yes' lack of cash. "They had a big debt and we were concerned and acted accordingly," said Dor. He added that severing ties with Yes was good for Baran after it had completed most of the project and the advantages of staying in a pact with the satellite television company had diminished. "We were afraid they wouldn't pay us, and we did not want to continue to be responsible for payments to subcontractors. The compromise brought us peace of mind," he said.
In contrast, Baran undertook some steps in late 2001 and the start of 2002 that are expected to yield greater growth in the future.
As part of its concerted effort to become active abroad, Baran acquired two U.S. companies and one German company.
Furthermore, Baran won a contract to set up cellular sites in Thailand, worth $10 million in the first stage, with another $40 million in the next two and a half years after that.
In addition, Baran is competing on a number of infrastructure projects, such as water purification, gas pipelines, and garbage and sewage treatment projects. Dor said Baran was looking abroad for such projects, because there were not enough infrastructure projects currently underway in Israel. He added that although no deal has yet been clinched on these potential projects, even winning one would be a substantial plum for the company. "Currently all the projects are still birds in the bush," he said.
Baran is involved in two major projects in Israel. The first, construction of Tower Semiconductor's new plant in Migdal Ha'emek, is about to be completed. It is a $180 million project (in which Baran's part constitutes about 46 percent). He said the second, $50 million-portion of the project has not yet been finalized and will depend on market conditions in Tower's market. The second project, worth a total of about $125 million, is to build advanced emergency warehouses for the Israel Defense Forces, financed by the Americans, in Nachshonim, in which Baran has a 33 percent share.
Baran's income in the fourth quarter 2001 totaled NIS 268 million, an increase of 20 percent compared to the same quarter in 2000, and an increase of 21 percent compared to the third quarter of 2001. Pre-tax profit also grew to NIS 42 million, compared to NIS 38 million in the previous quarter. However, its net profit of NIS 11.7 million was the lowest for the past five quarters.
Turnover for 2001 rose by 12 percent to NIS 107 million. The growth was partly due to consolidation of the results of its German company and to the way the Tower project dovetailed into the IDF project. Net profit in 2001 was NIS 64.4 million, down from NIS 72.2 for the previous year.
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