Abu Dhabi military contracts boost profits for South Africa's Denel

CAPE TOWN // The South African state-owned arms manufacturer Denel has reported a hefty increase in profits for the financial year, thanks in part to an ongoing contract to supply armoured vehicles to Abu Dhabi. “As far as we know, Denel has never performed with the figures which we have shown you” said the group […]

CAPE TOWN // The South African state-owned arms manufacturer Denel has reported a hefty increase in profits for the financial year, thanks in part to an ongoing contract to supply armoured vehicles to Abu Dhabi.

“As far as we know, Denel has never performed with the figures which we have shown you” said the group chief executive Zwelakhe Ntshepe at the company’s headquarters in Pretoria.

“The future looks positive, I am extremely proud of the company’s performance during the year we are reporting on.”

The company delivered a net profit of 395 million rand (Dh103.2m) for the 2015/16 financial year, 125m rand higher than the previous year, an increase of 40 per cent. Total revenue for the year was 8.2 billion rand.

Mr Ntshepe said exports now accounted for 6 per cent of revenue, although this was expected to grow. The company did have a debt:equity ratio 1.6, which he said was “unacceptable”, adding Denel plans to reduce this.

Last year a division of the company, Denel Vehicle Systems, said it had signed a contract with Nimr Automotive in the UAE to produce its range of six-wheeled N35 armoured vehicles. The contract is worth 900m rand and provides work for its two major divisions for at least two years.

Also, this month, Denel Vehicle Systems shipped its first consignment of four-wheel drive RG31 vehicles to Abu Dhabi’s International Golden Group (IGG), a defence and security engineering firm. The RG31 is one of Denel’s best-selling variants, with units in service with the US armed forces, and UN peacekeeping forces such as those from Spain and Canada.

The type ordered by the UAE is a mortar-carrying variant and once they arrive in the UAE will be further kitted out to suit local conditions, Denel has said. The RG31 has a range of 800km at a speed of 130kph and carries a crew of four people, including the driver. It provides protection for the crew from roadside bombs, small-arms fire and landmines.

Denel’s origins lie in the apartheid regime’s weapons programme. It had at the time pioneered weapons systems that are standard today; drones, super-long range artillery and mine resistant armoured personnel (MRAP) carriers.

In the years following the end of the apartheid era conflict that ended in 1994 the company has struggled to find its footing as demand for its products waned and Denel became almost entirely dependent on the South African defence force for income.

However, during the early stages of the Second Gulf War and Afghanistan it became apparent that the light vehicles used by western militaries were vulnerable to roadside bombs, and interest resumed in MRAP technology.

The US and other militaries quickly developed their own MRAP designs, largely inspired by the Casspir, a mine-resistant vehicle that had seen extensive use during the apartheid conflict.

Denel has since kept developing its own range designed specifically for dry, desert-like conditions.

It also has a venture with the UAE’s Tawazun to form Tawazun Dynamics to manufacture the Umbani guided-bomb kit under the name Al Tariq.

The company has also sold the Umkhonto surface-to-air missile and Mokopa air-to-surface missile to Algeria for its new frigates.

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Source: Business

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