Electra Reports 69% Net Profit Surge to NIS 93 Million Amid Domestic Recovery

Electra Ltd. posted a significant recovery in its second-quarter financial results, driven by a rebound in its contracting activities in Israel and expansion in its operation, service, and maintenance sector. The company reported revenues of NIS 4 billion, a 17% increase compared to the same quarter last year, and a gross profit rise of 11% to NIS 262 million. Operating profit climbed 43% to NIS 139 million, while net profit attributable to shareholders surged 69% to NIS 93 million, marking the best bottom line since Q2 2022.

The Israeli contracting sector and the operation, service, and maintenance sector were the main contributors to this growth. Contracting revenues in Israel increased by 35% to NIS 2.1 billion, accounting for 53% of group revenues. This growth was fueled by accelerated project execution, including the Tel Aviv Green Line light rail, data centers for Mega Or, and a new hospital tower at Assuta Ashdod. The inclusion of activities from the acquisition of Ter Arma also supported results. However, the contracting sector faced challenges due to the October 2023 war, which caused cost increases from restrictions on employing Palestinian workers and the need to hire foreign labor, alongside rising input costs. Operating profit margins in this sector dropped from 3% in Q2 2023 to 0.9% in Q2 2024, with losses recorded in subsequent quarters before returning to a modest operating profit of NIS 10 million in Q2 2026.

Electra's CEO, Itamar Deutscher, explained that many projects began before the war with pricing based on pre-war costs. Although government compensation helped restore profitability, it was insufficient for normal margins. New projects are now priced with updated costs, which should improve profitability as execution accelerates.

The operation, service, and maintenance sector generated NIS 935 million in revenues (23% of group revenues) with an operating margin of 8.3%. Deutscher highlighted efforts to extend customer relationships from contracting into ongoing operation and maintenance, providing steady recurring income. The sector benefits from acquisitions like logistics company A.R.D and expects further growth following a recent tender win for the fast lane on Highway 5 and regulatory improvements in public transport activities.

In contrast, Electra's international electro-mechanical contracting operations in Europe and New York experienced a 23% revenue decline to NIS 504 million and an 83% drop in operating profit to NIS 3 million. The downturn was mainly due to a prolonged halt in a refinery project in Poland, though work has recently resumed. Electra also plans to start a steel plant project in Sweden worth 52 million euros soon. The US revenue decline was attributed to the stronger shekel against the dollar and the completion of older projects. Deutscher noted a strong project backlog exceeding $800 million, including a new prison construction in New York starting in 2027.