Aryt Industries (TASE: ARYT), controlled by chairman Shmuel Meersohn and co-CEO Ran Eckhaus, and which controls 90% of Reshef Technologies , announced last week that Reshef had successfully completed tests of an electronic fuse system for urban warfare. The company believes that this development is a breakthrough in urban warfare. There is little competition in this area.
Aryt estimates the market for the new fuse at tens of millions of dollars. Aryt expects heavy demand for the product, in view of the growing global use of specialized combat units for urban warfare.
The new fuse is installed on munitions for the M203 40mm Grenade Launcher, which is installed on rifles for use by the infantry. Israel Military Industries (IMI) has developed munitions for the M203, and ITL Optronics (TASE: ITL) has developed the munitions' command and control system. The grenades are accurate to within 50 centimeters, while munitions currently in use suffer from inaccuracy. Aryt expects to sell the smart munitions for $70 each, compared with $30-40 for existing munitions.
Aryt Industries VP marketing Michael Levy said, "The new grenade what it took an average of five previous generation grenades to do. If the ordinary grenades had a killing range of two to three meters, with our proximity fuse, which explodes before reaching the target, the killing range is eight to ten meters. On the basis of this calculation, it's obvious that the cost/benefit ratio of our grenade is incomparably better."
Eckhaus said Aryt would earn a profit margin of 30-40% on sales of its specialized fuses. The new sector will therefore not affect the company's current profit margin, and will probably improve it. "We have no production problems. If we get especially large orders, we can outsource some production to Reshef Technologies' plant."
Aryt said its new fuse could be adapted to other types of munitions, cheaper than 40mm grenades. One of these applications is just around the corner. Coincidently or not, Reshef's plant is in Sderot, which has become the preferred target of Kassam rockets fired from the Gaza Strip in recent years. Aryt said the company had submitted a proposal to the Ministry of Defense to integrate the new fuses in systems designed to intercept Kassam rockets.
If the Kassam intercept program is approved, Aryt will presumably be part of it, creating another source of income for the company.
In an unrelated development, Aryt also announced last week that it had received a $1.7 million order for ordinary fuses.
Reshef's completion of development of the fuse for urban warfare is a milestone for Aryt, under Meersohn and Eckhaus's management. Aryt suffered from a shareholders equity deficit until the third quarter of 2004 (it stood at NIS 10 million at the end 2003). The company achieved NIS 300,000 shareholders equity at the end of the third quarter of 2004, and it expects this to increase in the fourth quarter. Aryt posted a net profit of NIS 5.1 million for January-September 2004, compared with a NIS 16 million loss in the corresponding period of 2003.
Aryt's sales turnover was NIS 17.2 million in January-September 2004, compared with NIS 6.3 million in the corresponding period of 2003. It had an orders backlog of NIS 15 million for 2005 at the end of the third quarter, indicating that it can be expected to have a good year, especially if it gets large orders for the new fuse.
These results have not been missed by TASE investors, who have spotted the company's potential. Aryt's share price rose 130% in 2003, 170% in 2004, and is up 16% since the beginning of 2005.
Published by Globes [online], Israel business news - www.globes.co.il - on January 27, 2005