Denel to exit some businesses within months
Denel has not yet released financial results for the 2018/2019 financial year, but is projected to be insolvent
Struggling state-owned defence company Denel aims to begin disposing of equity stakes and exiting loss-making businesses within months as part of its turnaround strategy, it told a parliamentary committee.
Denel, which makes ammunition, missiles and armoured vehicles for SA and customers elsewhere in Africa, the Gulf and Europe, received a R1.8bn cash injection from the government at the end of August after struggling to pay salaries and suppliers.
Denel is one of a handful of state-run companies that has needed to be bailed out by the government in recent months. A pillar of the country's once-mighty defence industry, the company recorded a R1.76bn loss in 2018.
Denel has not yet released financial results for the 2018/2019 financial year, but was projected to be insolvent, according to a presentation to parliament's portfolio committee on public enterprises on Wednesday.
It expects to raise R160m in the third quarter of the 2019/2020 financial year via the disposal of equity in Hensoldt Optronics, a producer of high-tech optics such as sensors and radars, in which it owns a 30% stake. The financial year runs from April 1 to March 31 with an October-to-December third quarter.
Denel CEO Danie du Toit said any deals were subject to government approval but negotiations over Hensoldt were in progress.
“We're on plan,” he wrote in a text message on Friday.
Exiting its loss-making LMT, an armoured vehicle business in which it holds a 51% stake, and its small calibre ammunition unit PMP should save it R70m in the same quarter.
Equity sales and partnerships involving core businesses like Denel Land Systems, missile unit Denel Dynamics and Denel Aeronautics should help raise another R4.4bn to the end of 2022.
Streamlining supply chains, reducing staff costs and exiting other businesses, including Denel Aerostructures, could reap R862m in further savings.
In a statement on Thursday, Denel said it foresaw about R30bn in deals over the next two years, including the largest export contract in the company's history.
Denel has not publicly named the customer. But the presentation to parliament says the contract, which includes a R1.5bn advance, focused on Egypt's navy and ThyssenKrupp Marine Systems vessels.