First Glimpse Inside Iscar Reveals 31% Profit Margin

OMAHA, Nebraska - Iscar's 2005 net profits were $440 million on sales of $1.4 billion, market sources have told TheMarker.

The Iscar Group, which keeps its financial results in total secrecy and has never leaked them to the press, refused to comment on the data.

Iscar's results are expected to remain confidential in the future, because Berkshire Hathaway also is quite secretive, including only minimal data about companies that it owns in its reports. Warren Buffett refused time after time to answer TheMarker's questions regarding the company's profitability, referring the reporter to Eitan Wertheimer. Wertheimer, as usual, refused to comment on company results.

The last time estimates of Iscar's profits were published was in 2002, when TheMarker magazine revealed net profits of $200-250 million. The source for that report was an investment banker who had met with Iscar to discuss the possibility of an IPO. On the basis of these estimates, TheMarker placed the Wertheimers second in that year's list of Israel's 500 richest.

Iscar decided not to go public, and three years agreed to sell control of the company to Berkshire Hathaway. The company's profitability, around one-third of revenues, is rare in the business world, particularly in industry. However, market sources estimated that Iscar is capable of reaching even higher levels of profitability due to its special business model, ability to charge a high premium on its products, and low taxes it pays.

Iscar manufactures metal-cutting tools and carbide blades for those tools

The company operates out of a Galilee-based production center and employs thousands. Most sales are for export, and the company is considered a world leader in its field.

Stef Wertheimer established Iscar in Nahariya in 1952, later moving it to the Tefen industrial zone.

The company has additional plants in Europe and the Far East. This year, Iscar began building two factories in China, as well as plants in Korea, India and Japan.