Denel confirms Aerosud, DSA talks


State arsenal Denel has confirmed that it has received a conditional proposal from the Aerosud group relating to Denel Saab Aerostructures (DSA), “which the company is evaluating and discussing with Aerosud.”

Denel CE Talib Sadik says it “is too early make announcements on the details of any transaction. There are also a number of conditions … that need to be fulfilled. DSA unfortunately remains a loss-making operation and has not achieved self-sustainability.” Sadik reminds DSA was to blame for a loss of R328 million of a total Denel Group loss of R246 million for the year to March 2010.
“We have launched a holistic turnaround plan at DSA focused on lean manufacturing principles and continuous improvement against international benchmarks. This is to ensure cost effective, quality and on-time delivery to customers. We have made major strides with this programme, with key KPI’s achieved,” Sadik said. “The business is still in a turnaround phase and that we are making steady progress towards meeting our goals.”
“The ultimate objective is to ensure the sustainability of the capability on an optimal cost basis to the shareholder in line with Government’s Industrial Policy Action Plan (IPAP 2) and the Growth Path. It is for this reason that we are in talks with Aerosud.”

While the negotiations continue DSA remains responsible for important work packages on the Airbus A400M and is achieving all the key milestones on the project, Denel adds in a media release in response to a Solidarity trade union statement that the mooted sale would likely lead to a fourth wave of retrenchments at DSA. Sadik says this is too early to predict. “But I repeat that we are trying to save, and make sustainable, a loss-making business.”

Further claims that Denel Group had received R8.82 billion in government aid were incorrect, Sadik noted. “Denel is a state-owned enterprise of enormous strategic importance to South Africa. As such it is funded by government. The total amount of recapitalisation during 2006 and 2007 was R3.5 billion and another R1.85 billion in shareholder guarantees were provided for debt funding.”
“Denel is on its way to achieving sustainability and the talks with Aerosud are part of that,” he said.