Denel Aerostructures makes its first profit


Denel Group company Denel Aerostructures has for the first time in its history turned a profit after years of losses.

The aircraft component manufacturer, based at Denel’s Kempton Park campus, recorded R7 million in earnings before interest and tax (EBIT) for the 2015/16 financial year ending 31 March, versus a R19 million loss for 2014/15. The company recorded a loss of R44 million in 2013/2014 and R46 million in 2012/2013. Its loss amounted to R74 million the previous year and R237 million in the 2010/2011 financial year. Its losses were even worse before that: R328 million in 2009/2010.

Aerostructures has for the last few years been the only unprofitable division in the Denel Group, but now that title is passed to the new Denel Integrated Systems and Maritime (Denel ISM) division, which recorded a R17 million loss for 2015/16, according to Denel’s most recent annual report, and Denel PMP (a R61 million loss for 2015/16 versus a R38 million profit for the previous year. Much of this loss can be attributed to recapitalisation at PMP).

Aerostructures initially hoped to break even in the 2014/15 financial year after a major turnaround strategy was implemented. This included efforts such as reducing the rental footprint, outsourcing some activities, reducing the workforce and restructuring loss-making programmes.

Denel is merging Aerostructures with Denel Aviation, which will be headed by Aviation CEO Mike Kgobe. The process should be completed soon and is not expected to result in any job losses. There are obvious synergies between merging Aviation and Aerostructures – for instance Aerostructures makes the drop tanks for the Rooivalk attack helicopter, which Aviation supports, and the two have worked together on the Small African Regional Aircraft (SARA). Both companies are situated at Denel’s Kempton Park campus next to OR Tambo International Airport.

Denel Aerostructures’ core activity is producing components for the A400M transport aircraft, 174 of which have been ordered by eight nations. It is responsible for the design, certification and manufacturing of the A400M Wing to Fuselage Fairing, which is the largest single aerostructure component ever produced in South Africa. DAe also produces A400M Top Shells – made up of more than 1 100 parts comprising a large machined skin engineered out of aluminium alloy. Each aircraft is fitted with two top shells, positioned in front of and behind the wings where it joins the fuselage.

In 2013 and 2014 DAe won additional work for the production of A400M ribs, spars and swords (the skeletal support structure) for the vertical tail plane, as well as International Standards Organisation (ISO) cargo locks to guide and secure ISO containers. DAe is also producing the Central Guide Vehicle Restraint System (CGVRS) for managing smaller containers. In late 2014 DAe received another contract, for the supply of cargo door toes for the A400M, takings the number of work packages with Airbus to six.

Denel Aerostructures is diversifying into the commercial manufacturing sector. Previous projects have involved designing and manufacturing parts for military aircraft like the Saab Gripen and Agusta A109 Light Utility Helicopter, but the company has also made tail planes for the Gulfstream G150 executive jet, and recently received a contract to manufacture winglets out of composite materials for a US-based business jet. DAe hopes to become a Tier 1 supplier and deliver aircraft parts to manufacturers like Airbus, Boeing, Bombardier, Embraer, Superjet, Gulfstream and their super Tier 1 suppliers, such as Spirit AeroSystems, GKN Aerospace, Premium Aerotec and Stelia Aerospace.