Tenth year of losses for Denel

Johannesburg - On Wednesday the state-controlled weapons manufacturer Denel declared a loss for the 10th successive year.

The company is expecting to become profitable only by 2012, and says it requires an additional R1.7bn injection from government.

"In 2006 government acknowledged that Denel needed R5.2bn to become profitable once more. The company was for all practical purposes insolvent. Denel then received R3.5bn, but government has since given Denel only state guarantees. We have had to seek funding in the markets ourselves," Talib Sadik, Denel chief executive pointed out on Wednesday.

According to Sadik, Denel has taken up R1bn worth of debt thanks to government guarantees, but Sadik says this indebtedness puts the company under great pressure.

"This year interest payments increased from R67m to R86m. This figure will rise even more to R100m-plus in the coming financial year. If Denel receives the R1.7bn from government, this will lighten the burden of the debt."

Between 2006 and 2008 Denel regularly declared it would become profitable by 2010, but large losses in its missile and aeronautics divisions will now cause further delays in profitability.

Denel's strategic and commercial head, John Morris, says the company's focus on exports could prove fruitful in the long term.

"Since 1994 Denel's exports have grown 54% in real terms. Exports currently represent 40% of Denel's total market."

Sadik maintains that Denel does not sell weapons to Libya, North Korea or Zimbabwe.

"Our biggest export market is in Europe."

In the recent financial year Denel spent R1.2bn on research, and development and salary costs amounted to R1.8bn. About 7 400 people work for Denel, 400 of whom are engineers.

- Sake24.com