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Elco Holdings, controlled by Gershon Salkind, yesterday admitted to losing NIS 21 million in the first quarter of 2005.

The first quarter preceded a serious overhaul at Elco, which included shedding Elco Brandt, its French maker of air conditioners and other household appliances, which has been bleeding money for years. Elco also sold off Liberty Properties.

Elco's 90 percent stake in Elco Brandt is being sold to Fagor, though the transaction is only scheduled to close in the third quarter. It should net Elco a capital gain of NIS 440 million.

Meanwhile, Elco booked Elco Brandt's results under "results of ceased operations": it contributed a loss of NIS 2 million.

Elco bought Elco Brandt three years ago from its receiver. But the unit found itself swamped in the tough, competitive market place, in which raw material prices - such as of copper and plastics - were constantly climbing. The steps Elco could take to streamline Elco Brandt were severely limited by French labor laws regarding streamlining at companies in recent receivership.

Yesterday Elco also announced selling all its 84 percent holdings in Liberty Properties to a group of investors, at a company valuation of NIS 100 million. The deal cost Elco a capital loss of NIS 18.5 million.

The main remaining divisions at Elco are Electra Israel, which operates in services and infrastructure, installing air conditioners, electrical systems, elevators and the like; and Electra Consumer Products, which also makes air conditioners and other household appliances. These two companies contributed NIS 1.33 billion in revenues but gross margins sank to 17.6 percent of turnover, down from 19.4 percent in the parallel quarter.

Elco's operating profits dropped 17 percent to NIS 49 million, while financing expenses soared to more than NIS 40 million in the quarter.

Electra Israel contributed NIS 11.5 million profit in the first quarter, but Electra Consumer Products cost Elco a loss of NIS 4.8 million. 

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