Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eltek Ltd (ELTK, Financial) achieved record revenue of $13.5 million in the third quarter of 2024.
- The defense market segment accounted for 64% of total sales, indicating strong demand in this sector.
- The company maintains a strong backlog and anticipates steady growth in demand for high-end products.
- Eltek Ltd (ELTK) is in the final stage of opening a new production hall, part of a $2 million investment program.
- The company has adopted a dividend distribution policy, allowing for up to 25% of net profit to be distributed as dividends.
Negative Points
- Gross profit decreased to $3.5 million in Q3 2024 from $3.7 million in Q3 2023, reflecting a less favorable product mix.
- Operating profit fell to $1.9 million in Q3 2024 compared to $2.3 million in the same period last year.
- Net profit for Q3 2024 was $1.7 million, down from $2.1 million in Q3 2023.
- The industrial market segment experienced a slowdown due to reduced demand from primary customers.
- Increased wages for manufacturing employees impacted gross margins, reflecting labor market conditions in Israel.
Q & A Highlights
Q: Can you provide insights on the defense sector orders and expected revenue mix?
A: Eliezer Yaffe, Chief Executive Officer: The increased backlog is mainly due to the strong defense sector, and we expect the profitability of its products to remain stable or potentially increase.
Q: What is the remaining CapEx for the new facility, and what are the expectations for capacity?
A: Ron Freund, Chief Financial Officer: The facility, part of the accelerated investment plan, cost $2 million and is already paid. Approximately $7 million to $8 million remains for 2025, including coating lines. We expect production capacity to support sales of $55 million to $65 million by the end of the program.
Q: Can you elaborate on the labor cost issues affecting the cost of goods sold?
A: Ron Freund, Chief Financial Officer: We increased workers' salaries to retain and recruit employees due to high demand in Israel. We believe we've reached a stable salary level and do not foresee further increases at this stage.
Q: Are there any updates on exploring opportunities outside the defense and medical markets?
A: Ron Freund, Chief Financial Officer: We continue to operate in defense, aerospace, industrial, and medical segments. We aim to increase operations in the commercial sector but do not plan to expand into new areas.
Q: What are the expectations for revenue growth and gross margins in the fourth quarter and beyond?
A: Ron Freund, Chief Financial Officer: We do not provide specific forecasts for next quarter revenues. However, we anticipate gross margins to be between 26% to 29% in the medium to long term, considering current wage and price conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
