Business in Brief / Cellcom Profits Plunged in Q2 Amid Intense Competition, Retirement Costs

Cerragon soars as company returns to black; Energy shares power Tel Aviv Stock Exchange higher.

Tali Mayer

Cellcom profits plunged in second quarter amid intense competition, retirement costs

Cellcom, Israel’s largest cellphone operator, yesterday reported a 85% drop in second-quarter net profit, hurt by intense competition in and a one-off expense for a voluntary retirement program. Net profit fell to 12 million shekels ($3.2 million), down from 79 million a year earlier but higher than a forecast of 3.5 million in a Reuters poll of analysts. The report came a day after rival Partner Communications (Orange) reported an 80% decline in quarterly profit. In the second quarter, Cellcom’s revenue fell 10% to 1.04 billion shekels as it lost 37,000 customers, cutting its subscriber base to 2.848 million at the end of June. The retirement plan cost was 25 million shekels in the April-June period. Cellcom is taking advantage of telecoms reforms to launch an Internet-based television service. Shares of Cellcom, which opted not to distribute a dividend for the second quarter, ended up 1.1% at 23.70 shekels. (Reuters)

Cerragon soars as company returns to black

Shares of Cerragon Networks rallied yesterday after the maker of equipment for cellular operators returned to profitability and turned in results of analysts’’ expectations.  The company said net income adjusted for one-time expenses and the cost of stock options reached $3 million, or 4 cents a share, turning around from $5 million, or 10 cents, a year earlier. Revenues climbed 4.8% from a year ago to $94.8 million. That was better than the average estimate of analysts surveyed by Capital IQ Consensus, who had expected Cerragon to break even on revenues of $95.01 million. “We reached a very important milestone in the second quarter by clearly restoring our financial stability with solid profitability and positive cash flow,” said CEO Ira Palti. “More important, we are much more confident that we can continue the trend of profit improvement.” Cerragon shares finished 13.1% higher at 5.57 shekels ($1.47). (Dror Raich)

Beit Shemesh Engines eyes U.S. acquisition

Beit Shemesh Engines, which makes aircraft parts and provides upgrade services for planes, is exploring the possible purchase of an engine marker. Industry sources say it is targeting a U.S. company. “Beit Shemesh Engines plans to continue exploring options to grow via acquisitions of the overseas companies in order to provide a complete solution for customers and in order to enter new markets and find new customers,” said CEO Avner Shaham. Beit Shemesh posted a 12% increase in sales in the second quarter from a year ago, to $19.2 million, thanks mainly to a pickup in overseas orders.  That left the company with an eightfold increase in net profit, to $1.8 million. Orders for the second half of the year stand at $39 million. Shares of Beit Shemesh Engines closed up 4% at 33.42 shekels ($8.79). (Shelly Appelberg)

Energy shares power Tel Aviv Stock Exchange higher

Energy shares carried the Tel Aviv Stock Exchange higher yesterday after the government unveiled the terms of its framework agreement with the natural-gas industry (see story on page 16). The TA-25 and TA-100 indexes closed nearly 0.7% up, at 1,711.66 and 1,488.52 points, respectively. Turnover was 1.35 billion shekels ($360 million). Besides rallying energy shares, other big gainers were the cellphone companies, despite two of the biggest operators reporting sharply lower second-quarter profits. Partner Communications (Orange) jumped 2.7% to 1.60 shekels. Magic Software led TA-100 gainers among nonenergy stocks, adding 4.2% to end at 23.60 shekels after Barclays set an $8 target price for the stock, citing strong quarterly results this week. Hadera Paper Mills rose 1.7% to close at 116.60 after the private equity fund FIMI said it had completed its acquisition of a 59% stake in the company from Clal Industries. In foreign currency trading, the euro slipped 0.5% to a Bank of Israel rate of 4.2281 shekels. (Dror Raich)