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Israeli Drones Over Brazil’s Stadiums Help Elbit Sales

(Corrects Boeing role in project in 10th paragraph).

Israel’s Elbit Systems Ltd. (ESLT), whose drones already provide crowd surveillance above Brazil’s soccer stadiums, is seeking a sales boost as the South American country bolsters security for the 2014 World Cup and 2016 Olympic Games.

“The intelligence-gathering electronic and optics technologies of Elbit and our Brazilian partners are perfectly suited for the homeland security challenges at these events,” Chief Executive Officer Bezhalel Machlis said in an interview.

Increasing demand from Latin America, South Korea and Australia is spurring earnings at Elbit even as defense budgets shrink in the key North American market, with second-quarter net income surging 30 percent to $50 million, it said earlier today.

In Brazil, the need to guarantee security during the world’s two biggest sporting events has been given fresh impetus after the Confederations Cup soccer tournament in June prompted record numbers of people to take to the streets in protest at a range of issues including spending on state-of-the-art stadiums.

Haifa-based Elbit closed 3.7 percent higher at 162.80 shekels in Tel Aviv, its biggest gain since April 10, giving a market value of $1.86 billion. The stock was the best performer on Israel’s benchmark TA-25 Index.

Elbit’s earnings advance stems from a strategic decision to focus on electronic, optic and cyber-defense technologies as governments scale back big-ticket military platforms such as tanks and artillery, Machlis said in Tel Aviv.

Independent

In some cases, Elbit is even benefiting from defense cuts, with demand gaining for combat-simulation programs that make it possible to train troops without using live ammunition, he said.

In Brazil, Elbit has a joint venture with Embraer SA (EMBR3) through the Israeli company’s AEL Sistemas subsidiary, and the air force already uses its Hermes 450 drones.

Elbit said this month its Australian subsidiary had won a $32 million deal to supply police with an intelligence system, while among more traditional defense activities, it aims to win work on a future Korean attack helicopter and combat aircraft programs, Machlis, 50, said on a conference call today.

While Elbit often joins with other companies on projects such as an aircraft-defense system developed by the company and marketed together with Boeing Co. (BA), Machlis, who succeeded veteran CEO Joseph Ackerman in April, said it plans to remain independent and that any merger would probably face hurdles given its key defense role.

Israel’s other major defense businesses, including Israel Aerospace Industries Ltd., Israel Military Industries Ltd. and Rafael Advanced Defense Systems Ltd., are government owned.

To contact the reporter on this story: Calev Ben-David in Jerusalem at cbendavid@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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