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Electro Optic Systems expands capacity as order book grows

The company recently executed a $170 million contract to supply weapon systems.
A weapon system mounted on a vehicle
Electro is expanding into a larger facility in Australia

Electro Optic Systems Hldg Ltd (ASX:EOS) is significantly expanding its production capacity after executing a major weapon systems order and becoming the preferred tenderer for two others.

The company produces robotic or remotely-controlled weapon systems, tailored to mount customer weapon inventories.

Electro had executed a $170 million contract to supply weapon systems to aerospace and defence systems company Orbital ATK Inc (NYSE:OA) in June this year.

The contract, deliverable from 2017 to 2020, relates to Electro’s new R-400S-Mk2 weapon system product, released to the market early in 2017.

The R-400S-Mk2 product has been tendered for two other international customers who have chosen Electro as their preferred bidder for contract negotiation.

Significantly, the company now expects to exceed $500 million in 2017 orders for its new weapon system.

Electro has entered into an agreement for a larger facility in Australia that has a production capacity of $150 million per annum per shift to be operational from Q1 2018.

The company has been working with its suppliers to increase capacity, improve quality and reduce risk through just-in-time supply chain management.

Electro’s shares were last trading circa 8% higher intra-day, at $2.75.

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