Denel’s plan to stop manufacturing components for the Airbus A400M Atlas airlifter will save the company R250 million as part of the state-owned entity’s turnaround strategy.
In a presentation dated 29 March, Denel said a “managed exit with Airbus” could bring it an annualised benefit of R250 million.
Denel Aeronautics aims to wind down A400M component production over the next six to 18 months. Exiting the A400M agreement was first announced in March, but the timeframe and financial impact were not mentioned.
A spokesman for Airbus said: “The agreement to withdraw the A400M work packages is a mutual one. Airbus and Denel are discussing how best to proceed.”
Danie du Toit, Denel Group Chief Executive, said last month in view of Denel’s ongoing strategic review of its operations, the two companies agreed continued manufacturing of aircraft parts by Denel is no longer sustainable in its current form. “Denel and Airbus continue to collaborate in other areas and intend to build, expand and strengthen their strategic industrial partnership,” Denel said.
Renegotiating the A400M contract is part of Denel’s turnaround strategy to reposition the company and return it to profitability – Denel made a R1.7 billion loss in the 2017/18 financial year. Under its new strategy, the company plans to exit non-core areas of activity, divest from non-viable core business areas and focus on viable core business activities that will led to long-term sustainability; reposition the core viable business areas to leverage capital and market access; and focus on export opportunities through strategic equity partnerships and joint ventures. (end of excerpt)
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