Israeli Firm Wins $800m Jet Engine Contract

Twenty-year agreement is biggest ever for Israeli maker of jet engine components

Bet Shemesh Engoines factory.
Emil Salman

Bet Shemesh Engines, a small Israeli manufacturer of jet engine components for some of the world’s leading aerospace companies, said on Monday it has signed a long-term contract with Pratt & Whitney Canada worth $800 million.

The company has been working with P&W, one of the world’s big three makers of jet engines, for about 35 years, including a long-term agreement due to expire at the end of 2019. But the new deal, which will run from 2020 to 2039, marks a substantial increase in the value of orders P&W will be making in the future.

CEO Ram Drori said the contract was the biggest ever awarded to Bet Shemesh Engines, whose customers include GE Aviation and Siemens as well as the Israel Air Force. The company specializes in high-tech components, such as precision castings, forges and aircraft frame assemblies.

“This deal is an expression of long-term strategic cooperation between Bet Shemesh Engines and P&W based on the companies’ close relations. With this deal, we now have a record $2.6 billion in revenue coming from framework agreements,” Drori said in a statement.

Shares of Bet Shemesh Engines, which is majority owned by the FIMI private equity fund, rose 7% to 96.40 shekels ($26.75) on the Tel Aviv Stock Exchange.

P&W Canada is a unit of P&W America, which in turn is owned by the American multinational United Technologies. Earlier this month United Technologies announced plans for a merger with the U.S. defense maker Raytheon that will create an aerospace and defense giant called Raytheon Technologies.

Bet Shemesh Engines, which is based in the eponymous town between Jerusalem and Tel Aviv, not only not only components but also reconditions jet engines. Its subsidiaries include Carmel Forge, which it acquired last year, and a Serbian company called Livnica Preciznih Odlivaka.

Bet Shemesh Engines has been on a growth trajectory for the last 10 years, especially after it was acquired by FIMI from the holding group Clal Industries in 2016 at a 300 million shekel valuation. Even before Monday’s contract was announced, the company’s market capitalization on the TASE was close to 800 million shekels.

Last year its revenues reached 367 million shekels, an increase of 19% from 2017, although net profit fell about 7% to 28 million. In the first quarter of 2019, revenues jumped more than 75% to 141 million, mostly due to the addition of Carmel Forge’s sales. Net rose even more sharply, from 7.5 million to 20.7 million.