Denel has five-year plan to break even but still needs cash – statement
South African state defense firm Denel hopes to return to profitability within the next five years via a restructuring plan, but will still need significant cash injections to achieve this, she said on Wednesday in a statement. communicated.
The company, which manufactures military equipment for the South African armed forces and for export, faces liquidity problems, is dependent on government bailouts and has so far struggled to implement its strategy of recovery.
His problems have worsened over the past year amid the coronavirus crisis and a series of board exits linked to his budget woes, according to a senior official in the Department of Public Enterprises (DPE), the main government department responsible for the business.
In a statement on Wednesday, Denel’s interim chief executive William Hlakoane said that while a comprehensive restructuring plan would “revitalize” Denel and allow it to return to profitability within five years, significant cash injections would still be needed.
He added that Denel was encouraged by the support of the DPE, who recognized the need to help Denel manage his finances.
“Thus, I am convinced that discussions with other government departments which have a keen interest in Denel’s survival such as… the National Treasury will soon bear positive results,” he said.
Denel’s restructuring plan will result in the reduction of its operating divisions from six to two, one focused on engineering and the other on manufacturing and maintenance.
Hopes of asset sales by Denel, which suffered a loss of 2 billion rand ($ 134.82 million) in the year to March 2020, have yet to materialize. But Hlakoane said the company could make 1.5 billion rand from it over the next five years.
However, he said, immediate large infusions of funds were needed to continue ongoing operations, implement his plan and pay salaries, which he apologized for not fully honoring.