Ituran Location and Control (TASE: ITRN) yesterday reported an operating profit of NIS 6.8 million in the second quarter of 2002, after breaking even in the first quarter.

Ituran's 18- month rehabilitation plan included shutting down unprofitable operations, including in Washington and New York. The company kept only Florida as an American site.

Three years ago the company, which specializes in locating stolen vehicles, decided to penetrate the South American market. Ituran invested in setting up infrastructure in the two largest economies in the region, Brazil and Argentina, which are now in serious crises.

But Ituran's CEO and chairman of the board, Izzy Sheratzky, said the business targets the rich, who were not hit by the economic crises.

Subscribers pay $12 a month - "most of the people who drive Mercedes cars don't even feel this," he said. The crisis sent the crime rates up, which boosts demand for Ituran's products, he said.

"We still have a lot of work ahead in South America and it is hard to make projections, but two months ago I would not have guessed that we would sell 10,000 units in Brazil," Sheratzky said.

The company invested $18 million in establishing operations in Sao Paulo and Campinas in Brazil, and in March the first order came in, worth $9 million.

Ituran announced it will cut the activity of subsidiaries that import and sell sound systems and install protective devices for automobiles. "We do not intend to invest any more money, just to generate cash. Every subscription we sell exceeds the related operating costs."

Sheratzky said Ituran has 210,000 subscribers world wide. These comments may calm Ituran shareholders who have been losing sleep when the company's working capital fell into deficit - usually a sign a company may go belly up. "Ituran no longer has a problem with working capital, and we still have lines of credit we have not used," Sheratzky said.

But Ituran is still one of the most leveraged companies in Israel. It has to repay NIS 122.5 million in credit and NIS 47 million in long-term loans. "We plan to repay most of the money by the end of 2003," Sheratzky said.

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