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Cape Town - State-owned armaments manufacturer Denel achieved a net profit of R111m for the year to March 2011 and generated cash of R178m from its operations, it said on Wednesday.
This is the first time since 2001 that the group is in the black.
"We are pleased with our results, in particular that the business generated cash from operations of R178m, as compared to last year, when we utilised R344m," Denel CEO Talib Sadik said.
Denel's defence, security, certification, and training clusters, which were profitable for the second consecutive year, generated normalised profits of R130m and cash of R278m through improved programme management and cost savings.
Denel group financial director Fikile Mhlontlo said the results had been influenced by improved efficiencies, cost-containment exercises, improvement of financial performance by associates, and significant once-off items.
These once-off items included a R463m accounting gain from restructuring the closed Denel Pension Fund.
On Denel's high debt levels, Mhlontlo said the funding balance had remained at R1.85bn resulting in an annual interest charge of R118m.
"We are engaging the shareholder with a view to restructuring the funding balance in order to reduce the interest burden," he said.
Denel's products developed through the application of innovative Denel technology were used primarily to meet the requirements of the SA National Defence Force.
Over the past years, Denel's products have been diversified into civilian applications such as civil security, crime prevention, protection of assets, improving workplace safety and productivity, and rendering support to the mining and electronic sectors.
While the group employed about 6 500 employees (including those in associated companies), it was estimated that Denel's activities contributed to the creation and sustainment of over 30 000 skilled technical jobs in the recent past through the use of local sub-contractors.
In the financial year to March 2011, Denel bought materials and services worth over R2bn from local suppliers, including the spending of R789m on research and development.
The company earned R1.2bn in foreign currency.
Sadik highlighted a below-inflation increase in operating costs which included an average salary increase of 4.8%, improved efficiencies through better programme management, and group-wide cost optimisation.
The combined order book presently stood at R2.7bn and the combined order pipeline was R8bn.
Although the group returned to profitability for the first time in a decade, Denel's performance continued to be negatively influenced by Denel Saab Aerostructures (DSA), which incurred a loss of R237m, a 28% reduction compared to last year.
DSA's cash use improved to R104m, compared to last year's R263m, driven by the successful implementation of the turnaround plan which commenced in 2009.
The plan included improving manufacturing efficiencies and rightsizing the business towards global benchmarks.
Sadik noted that had DSA achieved break-even, Denel would have posted a net profit of R348m.
Notwithstanding the narrower loss and improved efficiencies, DSA would still require further shareholder support over the next five years to ensure it became self-sustainable, he said.
This is the first time since 2001 that the group is in the black.
"We are pleased with our results, in particular that the business generated cash from operations of R178m, as compared to last year, when we utilised R344m," Denel CEO Talib Sadik said.
Denel's defence, security, certification, and training clusters, which were profitable for the second consecutive year, generated normalised profits of R130m and cash of R278m through improved programme management and cost savings.
Denel group financial director Fikile Mhlontlo said the results had been influenced by improved efficiencies, cost-containment exercises, improvement of financial performance by associates, and significant once-off items.
These once-off items included a R463m accounting gain from restructuring the closed Denel Pension Fund.
On Denel's high debt levels, Mhlontlo said the funding balance had remained at R1.85bn resulting in an annual interest charge of R118m.
"We are engaging the shareholder with a view to restructuring the funding balance in order to reduce the interest burden," he said.
Denel's products developed through the application of innovative Denel technology were used primarily to meet the requirements of the SA National Defence Force.
Over the past years, Denel's products have been diversified into civilian applications such as civil security, crime prevention, protection of assets, improving workplace safety and productivity, and rendering support to the mining and electronic sectors.
While the group employed about 6 500 employees (including those in associated companies), it was estimated that Denel's activities contributed to the creation and sustainment of over 30 000 skilled technical jobs in the recent past through the use of local sub-contractors.
In the financial year to March 2011, Denel bought materials and services worth over R2bn from local suppliers, including the spending of R789m on research and development.
The company earned R1.2bn in foreign currency.
Sadik highlighted a below-inflation increase in operating costs which included an average salary increase of 4.8%, improved efficiencies through better programme management, and group-wide cost optimisation.
The combined order book presently stood at R2.7bn and the combined order pipeline was R8bn.
Although the group returned to profitability for the first time in a decade, Denel's performance continued to be negatively influenced by Denel Saab Aerostructures (DSA), which incurred a loss of R237m, a 28% reduction compared to last year.
DSA's cash use improved to R104m, compared to last year's R263m, driven by the successful implementation of the turnaround plan which commenced in 2009.
The plan included improving manufacturing efficiencies and rightsizing the business towards global benchmarks.
Sadik noted that had DSA achieved break-even, Denel would have posted a net profit of R348m.
Notwithstanding the narrower loss and improved efficiencies, DSA would still require further shareholder support over the next five years to ensure it became self-sustainable, he said.
