Defence contractor scores $410m deal with overseas customer

Defence contractor scores $410m deal with overseas customer

Listed defence contractor Electro Optic Systems (ASX: EOS) has been awarded a $410 million deal with an overseas customer.

The Canberra-based company will provide significant quantities of its new R-400S-Mk2 remote weapons systems to the un-named customer.

This deal brings total sales of the new product to $600 million in the first 12 months of the product's release.

Speaking at the official opening of a new EOS development and production facility in the ACT, CEO of EOS Dr Ben Greene says the innovative product is a huge success for the company.

"This innovative technology for the first time allows 30 mm cannon systems to be deployed with unprecedented accuracy on light vehicles, significantly enhancing lethality and protection without compromising mobility, and at low cost," says Greene.

"EOS is also negotiating contracts with other customers who have completed their tendering process and already selected EOS. Further awards are likely."

Australia's export credit agency, Efic, provided assistance to EOS for this major expansion of defence industry capability, via a working capital facility and finance guarantee.

The new production facility in the ACT was developed during 2017 to meet the high demand for EOS' products and is expected to employ about 180 people by late 2018.

Greene says the company's successes were born from its R&D.

"Technology is the key discriminator in modern defence and aerospace products," says Greene.

"EOS has a large R&D commitment where we focus principally on leap-ahead technologies and creating new markets."

"Under two US Army contracts and its expert management from 1992-2007, EOS developed and perfected the remote weapon system which is now in common use globally."

The Australian Army is equipped with several hundred of EOS' products, which played a major role in Afghanistan.

Prior to the announcement of EOS' $410 million deal the company went into a trading halt on Monday 28 January. The company has requested to the ASX that it remains suspended until the close of business on Friday 2 February pending a capital raising.

EOS' announcement comes just one day from the Federal government's announcement that it will establish a $3.8 billion fund that will offer loans to local arms manufacturers in a push to rapidly grow Australia's defence export industry.

Prime Minister Turnbull says the government aims for Australia to become one of the top 10 exporters of weapons in the world within a decade. Australia currently is ranked 20th in arms exports.

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