Reutech, the defence arm of the electronics and services group Reunert, has posted a substantially increased operating profit of R151 million for the year ending September 30, due to a 26% increase in revenue.
Revenue for the year grew by 26% to R806 million, resulting in the “substantial increase in operating profit to R151 million,” Reunert said. “This was due to strong performances from all the businesses but, in particular, the contribution from Fuchs through execution of a long anticipated export order.”
Reunert said that Reutech Solutions repositioned its business and reflected a healthy operating profit increase of 95%. “The continued success of the mining surveillance radar increased revenue within Reutech Radar. Reutech Communications acquired the high frequency radio business of Saab Grintek, which completes our product offering.”
Last year Reutech’s revenue for the year ending September 30 decreased by 19% to R639.3 million, while operating profit decreased 20% to R48.7 million. Last year’s revenue drop was due to a substantially smaller than expected contribution from Fuchs due to the late receipt of an export order. The radar division, through its mining surveillance radars, had a successful year in 2011, the company said in a statement.
Reutech Chief Operating Officer Peter van der Bijl earlier this year told defenceWeb he was optimistic about “good prospects next year…we start next year with a reasonable amount of orders in hand.”
He noted that the defence industry is in a downward cycle, with the worst still to come as the main economies of the world heading for another recession. Already defence spending has been cut drastically in Europe, as well as military strength. As the European defence industry is in decline, there has been a focus shift in markets, with more attention being paid to the Middle East and Asia. Reutech has traditionally focused on these areas, especially Asia. Van der Bijl said that North Africa was a good market for the company, but that further south most countries cannot afford to procure equipment, with only small orders coming through. “Africa is a fragmented and small market,” he said. In particular, “The South African defence industry is not very healthy,” as it has suffered a number of reductions that have eroded its capacity.
Reutech gets around half of its revenue from civil work and exports – for instance, Reutech exports electronic fuses, including time and proximity fuses for mortars, artillery and rockets. Reutech Communications exports airborne and tactical radios while Reutech Radar exports three differing types of radars, including those used in the mining industry.
One of Reutech’s most prominent projects is the South African National Defence Force’s Project Radiate, which involves the production of new-generation radios. Full-scale production will begin next year and Reutech has built a new factory in Durban to supply the tactical radios to the SANDF.
The first phase of Radiate deliveries should take place in 2013 – these will involve vehicle and manpack radios. The other radios (short, medium and long-range systems) will gradually be phased in over several years. Since the new radios are backward compatible with old sets, they can be phased in smoothly.
Around 4 000 vehicle radios will be produced for Project Radiate, and similar numbers of manpack radios will be produced. Around a thousand radios will be delivered every year.
Reunert as a group reported that although revenues from its various businesses remained under pressure, particularly in the second half of the financial year, revenue increased by 7% to R11 662 million. Operating profit increased by 10% to R1 525 million.
The group said that the local and global economic environment remains ‘uncertain’. “We expect 2013 to be a challenging year. We remain committed to our strategy of diversifying our revenue streams and promoting efficiencies within our businesses.” The defence industry is particularly unstable, with Reutech seeing “uneven demand”, the group said.