DSA shrinks footprint

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Loss-making Denel Saab Aerostructures (DSA) is consolidating its operations in a move that it says will improve efficiency and cut costs significantly at the aerospace manufacturer.

The move will see the company’s entire operations brought under one roof, says CE Ismail Dockrat. This includes the design, manufacturing and assembly of critical parts for the Airbus A400M – the world’s most advanced military transport plane.

Dockrat says the reduction in occupied space will result in annual savings to the company of more than R20 million per year and the costs of the move will be offset within 24 months. “It brings us in line with global best practice and strengthens DSA’s position as a cost-effective supplier in a highly competitive industry. By cutting down on our production costs and streamlining the workflow the consolidation will contribute to the long-term sustainability of the company,” he says.

Sections of the company are currently located in various buildings on the sprawling campus. The move, to be completed by the end of 2012, will bring the entire operation, from design to final assembly, into one location. It will reduce in half the space occupied by the company – from 50 000 square metres to 25 000.

The move will also strengthen the high-performance culture in the company and enable it to compete successfully in a competitive global environment. “We will now have one company, with one vision, working together in one building,” says Dockrat.

State arsenal Denel posted a net profit of R111 million for the year to March 31, 2011 and generated cash of R178 million from its operations. It is the first time since 2001, when it banked R24.1 million, that the group was in the black. A look at the detail, however, show the profit can be attributed to a R463 million accounting gain from the restructuring of the closed Denel Pension Fund.

Then-Group CE, Talib Sadik, said Denel’s performance continued to be negatively influenced by DSA, which incurred a loss of R237 million. This was a 28% reduction compared to the year before. Sadik noted that had DSA achieved break-even, Denel would have posted a net profit of R348 million. He highlighted the improvement in the financial performance of DSA indicating that the operational turnaround of the business was bearing positive results. “Notwithstanding, the narrower loss and improved efficiencies, DSA will still require further shareholder support over the next five years to ensure it becomes self-sustainable,” Sadik said. DSA has been restructuring since 2009 and has retrenched hundreds of staff. It is not known why it has taken so long to decide to educe the business’ rented floor-space.

Dockrat says DSA is currently at the core of the country’s largest aerospace and aviation cluster located next to OR Tambo International, Africa’s largest and busiest airport. “This hub has already attracted other large companies in the aviation sector as well as a growing number of small businesses who act as suppliers and subcontractors,” adds in a statement. It is unclear what companies he is referring to. More than 60 small and medium enterprises have already been established on the campus, many of them as suppliers and subcontractors to the four major companies – including DSA – who are the anchor tenants. The space vacated by DSA might also attract existing or new players in the industry.

The statement notes OR Tambo will also be the focal point of one of the Special Economic Zones that is being established to advance government’s strategic objectives of industrialisation, regional development and job creation. “In addition, Ekurhuleni’s strategic plans to develop an Aerotropolis around the airport will provide momentum to the growth of the aerospace sector, which has been singled out by government for its ability to provide the country with long-term advanced manufacturing capabilities,” Dockrat adds. It is not clear how this meshes with previously announced Airports Company SA (ACSA) plans to demolish the Denel facilities to make way for a new runway. ACSA in July 2007 said one runway would be expanded in 2015 or 2016 and construction on a completely new one would begin in 2022, if the plan went ahead.

DSA says one of the biggest challenges of the relocation is to maintain full production schedules that meet the requirements of its client,Airbus. “Production deadlines are critical to the success and viability of a multinational manufacturing process and DSA will not keep the production of the airlifter waiting. To compensate for the fact that large pieces of machinery have to be moved from one location to another the company is adjusting its production schedules to ensure uninterrupted delivery of the final product,” Dockrat says.
“The movement of production processes also requires the recalibration of machinery and tools, the re-industrialisation of processes and in some cases requalification of equipment and processes to meet the exacting standards of the client in an industry where quality is vital to flight safety.

Meanwhile, an aviation village is being established in Centurion at Air Force Base Waterkloof.