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Defence|Denel|Financial|Manufacturing|Service|Technology|Manufacturing |Operations
Defence|Denel|Financial|Manufacturing|Service|Technology|Manufacturing |Operations
defence|denel|financial|manufacturing|service|technology|manufacturing-industry-term|operations

Defence group Denel to seek investment partners – CEO

19th February 2019

By: Reuters

  

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State-owned defence group Denel could sell stakes in some divisions as part of a new strategy to return to profitability within two years, its chief executive said on Tuesday.

The company has also asked the government for financial support to help underpin a strategy its board approved last week, Daniel du Toit told Reuters in an interview.

The strategy includes seeking equity partners in some of its core divisions, although a stake in the group is not for sale. It could also sell manufacturing and technology licences.

"We are the custodians of a sovereign and a strategic capability on behalf of the government and we will not dilute it or let it go," Du Toit said at the IDEX military exhibition in Abu Dhabi.

Denel, a cornerstone of South Africa's once-mighty defence industry, has been plagued by years of mismanagement. Du Toit was named as new chief executive in December as the government tries to turn around the cash-strapped company.

Reuters reported in November that Saudi Arabian Military Industries (SAMI) had made a $1-billion bid for a broad partnership with Denel.

(Engineering News Online in September 2018 quoted SAMI CEO Dr Andreas Schwer as saying that it was ready to invest in the South African defence industry.)

Du Toit said he was not aware of an offer by Saudi Arabia.

SAMI CEO Andreas Schwer said this week the State-owned defence firm was in talks to invest in several South African companies but it had not made a formal decision.

As part of the new strategy, Denel plans to shutter some operations where there is duplication or it is cheaper to buy the service from a third party. Affected employees would be retrained so they could move to other parts of the company.

"I don’t think we will retrench anybody. That’s not the plan," Du Toit said.

One operation likely to be cut is the manufacturing of ammunition cartridges which Du Toit said could save the company R40-million to R50-million.

Denel believes it could win R21-billion in contracts in the next six months and another R19-billion in the following six to nine months, mostly in the Middle East and North Africa.

Du Toit said that the company could be generating R8-billion in revenue in three to four years time, up from around R3-billion today, based on the new strategy.

Denel has also started talks with existing customers to cancel or renegotiate "onerous" contracts. Du Toit did not disclose which contracts the company is looking at.

"I am trying to clean up as soon as possible. I don’t want to take any of these things into the future," he said.

Denel expects to find out whether the government will give it a capital injection and access to additional facilities when the budget is announced on Wednesday.

However, the cash-strapped company is not relying on the injection and would be able to continue if he does not receive the assistance it asked for, Du Toit said.

Edited by Reuters

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