Loss-making State-owned aeronautical company Denel Aerostructures’ (DAe’s) schedule to achieve break-even has slipped by two years, in comparison to the forecast a year ago. DAe is part of the Denel defence industrial group.

In a written reply to a Parliamentary question by Democratic Alliance MP H B Groenewald, Public Enterprises Minister Malusi Gigaba revealed that the company hoped to break-even in 2016/2017. In June last year, DAe (then still called Denel Saab Aerostructures) hoped to be able to reach break-even in the 2014/2015 financial year.

“DAe remains in a turnaround phase, and due to the historic structural misalignment between its revenue and cost bases, it will continue to post losses in the short to medium term,” wrote the Minister.

The answer recapitulated already announced elements of the DAe turnaround plan, including staff retrenchments, reduction of the company’s physical footprint (thereby cutting rental payments), sharing some services such as human resources and information technology with other Denel companies, the outsourcing of noncore activities and the restructuring of loss-making programmes.

(The outsourcing included responsibility for all payroll functions, transfered to Denel Personnel Solutions, and the disposal of DAe’s steel heat-treatment facility to Turbomeca Africa.)

The answer also reported that DAe’s “raw material stock accuracy” had increased from 65% to 98%. The company’s operational environment had also been improved, in terms of material costs, throughput and scrap rates.

For the future, the business will retain and further develop its skills base, with a focus on the preservation of a strong engineering design capability. This latter capability has been identified, Gigaba’s reply stated, by an original equipment manufacturer (a term which implies a major international aerospace group) as a market differentiator for the South African company.

DAe is also seeking to exploit the technologies and capabilities it has acquired through its involvement in the Airbus Military A400M programme, in order to secure new orders. The company hopes to benefit from Airbus’ supplier network and is aiming for work packages from European and North American enterprises.

Regarding the A400M, DAe is restructuring to be able to ramp up production to meet the requirements of the programme. (It is known that the contract has been renegotiated.) The company makes the top shells for the centre fuselage section and the wing/fuselage fairings for the A400M.