JOHANNESBURG - State arms manufacturer Denel has trained its guns on building strong research and development partnerships with the Brics countries and the Middle East as it looks for new market opportunities to grow its armament business.
Lugisa Daniel Mantsha, chairperson of the Denel board, said they saw massive potential for growth in the Asia-Pacific region, which would soon “command more than half of global defence procurement outside the US”.
“At a time when defence budgets are contracting in many countries, Asia-Pacific is expanding and opportunities are opening up for Denel to find new markets for our world-class products, especially in the fields of artillery, armoured vehicles, missiles and unmanned aerial vehicles.”
Mantsha said the establishment of the controversial joint venture Denel Asia with Gupta-linked company VR Laser Asia, “was done to create a stronger foothold in this region. We are currently looking at various options to address this market”.
Last month Denel ended its involvement with VR Laser Asia following a focus of negative media attention to the detriment of its brand both locally and internationally. The arms manufacturer partnered with VR Laser Asia to penetrate the Asia-Pacific markets, viewed as one of the top-spending regions on defence equipment in the world.
Reduced
Salim Essa, a trusted lieutenant of the Gupta family, who are President Jacob Zuma’s personal friends, was the sole shareholder of VR Laser Asia. The immigrant Indian family has been accused of having undue influence in the awarding of state contracts and appointment of cabinet ministers.
Yesterday Denel posted a reduced profit of R333million for the year ended March 31, a significant decline from the R395m it achieved in the previous year. Revenue was also down from R8.2billion to R8bn, and just as in the previous year, no dividend was recommended.
Earnings before interest and taxes dropped from R637m to R628m during the period under review. The state-owned weapons company has blamed a “softer local demand” for its products for the contraction, as well as foreign exchange losses of R232m relating to the revaluation of revenue recognition debtors, partially offset by growth in export sales.