Denel munitions unit has global ambitions

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Johannesburg - Ammunition manufacturer Rheinmetall Denel Munition (RDM), a subsidiary of Denel, is positioning itself as the southern hemisphere’s munitions manufacturing hub.

As the company claims this spot, the SA National Defence Force (SANDF) will be able to source locally some modern ammunition that is currently only available offshore.

“The opportunity for the local market is definitely to produce, in future, modern ammunition which we can supply to the SANDF,” Norbert Schulze, the chief executive of RDM, said.

These munitions include insensitive high explosives, which were not available in South Africa in the past.

Self-destruct fuses for 40mm guns will also be available in the near future, making the duds, or ammunition that fails to explode, safe in the operational field. RDM has also introduced its new mortar ammunition and the Artillery Ammo range in South Africa, which fulfils modern ammunition requirements.

RDM, which supplies all the SANDF’s ammunition, has become the third-largest ammunition manufacturer, trailing only the US’s General Dynamics OTS and ATK.

It has become Rheinmetall’s second-largest research and development hub, with 120 engineers developing munitions.

“But from the new products point of view, we are definitely leading at the moment with mortar and artillery ammunitions,” Schulze said.

RDM is positioning itself as the southern hemisphere’s manufacturing hub for mortar ammunitions by becoming a full-service company, conducting research and development, designing, manufacturing and qualifying these ammunitions according to Nato standards.

Ninety percent of RDM’s production now goes to foreign markets. From accumulated losses of R441 million in the four years before RDM was turned around to focus on the international market, its cumulative profit is now forecast to reach R1.011 billion by 2015.

The company, 49 percent owned by state arms manufacturer Denel, entered the export market when Rheinmetall, the German defence equipment manufacturer, bought a 51 percent stake in late 2008.

At the time, Denel Munition was struggling and in a loss-making position as it needed sales of at least R1.2bn a year to break even.

“The [ammunition] business in South Africa is around R400m a year when there’s high demand and the break-even of the company is in the region of R1.1bn to R1.2bn before you really make any profit out of the operations. It was not sustainable with the local market alone,” Schulze said.

Denel made a decision to find an international partner and Rheinmetall gave RDM exposure to 85 countries where it had a presence.

In the five years since Rheinmetall became a shareholder, R840m has been invested in the business divisions at Boksburg, Boskop, Wellington and Somerset West.

At the Boksburg facility shells for explosives are manufactured, Boskop is an explosives filling plant, Somerset West manufactures 40mm munitions, as well as double- and triple-base explosives, and Wellington is a chemicals plant. The investment enabled the company to ramp up production to 100 percent of its capacity at the Wellington plant.

Operating at 60 percent capacity, the Boksburg plant has increased turnover almost tenfold from R59m in 2009 to R250m in the first half of 2013. - Business Report


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