Denel's profits up by R71m for the year

Denel's chief executive Riaz Saloojee said the improvement was a result of the integration of 11 businesses into six divisions and this had demonstrated its ability to be self sustainable and rebuild its reputation as a profitable business.

Public Enterprise Minister Malusi Gigaba said the company seemed to have turned the corner because it had achieved the improved performance in a challenging economic environment both locally and globally.

Gigaba called for greater synergies between state-owned enterprises such as Denel Aviation and the South African Airways components. He said this was not a suggestion for merger but the government would facilitate talks between the groups to find common ground and to leverage SA's capabilities and its research and development programmes.

Revenues rise

In the financial year‚ there was a 10% improvement in Denel's revenue after exports rose 34% from R1‚329m to R1‚783m. This was particularly within the missile and landward defence businesses.

Saloojee said: "We have managed to grow the company's export revenue in all of our key target markets‚ most notably in Africa‚ the Middle East‚ Asia-Pacific and South America. Local revenue amounts to 55% (R2‚135m) of the total revenue."

He said the operating expenditure had decreased from 27% to 24% of revenue‚ but the results continued to be affected by the interest on external borrowings and the financial losses posted by Denel Aerostructures.

Operational savings and new contracts signed had contributed to a significant reduction in losses.

"During the financial year‚ we successfully restructured the short-term debt of R1.185bn to a combination of short-term debt‚ three-year and five-year bonds to mitigate liquidity risks‚" he added.

Global suppliers

He said Denel had become a key manufacturer in the global aerospace and defence sectors. It had earned an international reputation in a number of niche markets, which included guided missiles‚ global civil and related aviation and aerospace sectors as well as for its artillery systems.

"Denel's capability in design‚ development and manufacturing is world-class‚ with technologies and products competing head-on with leading international competitors. If you look at this within the context of SA as an emerging economy and a developing country‚ mastering such technology and intellectual property makes Denel a truly proudly South African story‚" he said.

Saloojee had previously attributed low-profit margins to slow global economic growth and the government's policy on defence spending.

Denel in June announced that it would move beyond selling products and start developing partnerships with existing clients such as Brazil and the United Arab Emirates. "These business relationships will be based on something more sustainable than selling products," Saloojee said.

He said historically‚ Denel sold products and there was a lack of understanding or commitment to life-cycle and skills support.

The defence equipment and technology manufacturer has an order book of R21bn over the next eight years and is investing R530m of its revenue in research and development over the coming years.