Denel profitable by 2013?


State arsenal Denel plans to report a profit for the financial year ending March 31, 2013.

The company yesterday posted a loss of R544 million for the year-to-March 2009, a considerable improvement on the loss of R1.6 billion for the period ending in March 2006. The company lasted posted a profit – of R24.1 million – in 2001.

Business Report meanwhile worries that government`s failure to pay Denel an outstanding R1.7 billion of a R5.2 billion recapitalisation approved by Cabinet to pay for the company`s turnaround, “could have implications for other state-owned enterprises, particularly Eskom and SAA, which are seeking government cash injections.”

The paper sys an attempt to obtain comment from public enterprises spokeswoman Ayanda Shezi was unsuccessful.

It adds the outstanding money should have been paid this April.

Denel group CE Talib Sadik says government “had said no, but we haven’t lost that battle” and there are ongoing discussions with the government regarding the funding of the company.
“We believe it is important that we should be receiving some form of recapitalisation but in the interim we are trading with a government guarantee,” he said at a press conference at Denel`s Irene, Pretoria headquarters to announce the results.

Sadik hinted in May that Denel might seek more than the R1.7bn outstanding from its recapitalisation but admitted yesterday it would now “be lucky to get anything”, Business report added.

Efficient Group chairman and chief economist Dawie Roodt said state-owned enterprises should not be treated any differently from other companies as they were businesses.

Roodt believed it was a better approach for the government to provide a guarantee for the debt of state-owned enterprises because it internalised the cost. The downside was that the guarantee was not included in state debt, which could then appear lower than it actually was, he said.

Fikile Mhlontlo, Denel’s group financial director, said it had in excess of R1 billion of borrowings backed by the government and the short-term implication of this was the increased level of interest it had to pay.

Sadik said Denel paid about R80 million in interest in the past financial year but in the current year this would be in excess of R100 million, which would also impact on its turnaround.

The Engineering News quotes Sadik as saying the government guarantees “meant that it was not difficult for us to get the loans.”

“We have gotten competitive interest rates,” he added. This is because the group has been able to retain its high rating from Fitch, and this, in turn, is the result of the government stating that it regards Denel as a strategic asset, the Engineering News added.


Pic: Denel logo