The 10 per cent increase marks growth in its revenue for the third consecutive year on the back of a 34 per cent rise in export growth to 1.8 billion rand.
“I think what is important is that the quality of the result has been much better this time around. Opposed to the previous years, where there were once-off items that influenced positively the result, this time it has been largely due to the interventions we have made both on the operational side, on the sales, in the increase in the sales and also the efficiency programmes,” Denel CEO Riaz Saloojee told CNBC Africa on Monday.
“So it can be ascribed to a lot of the internal interventions and external interventions that we’ve made. I’m very happy with the quality of the earnings and I hope we can continue in this vain.”
Denel’s export base has been crucial to the growth of their revenue stream but with countries such the United States, who are in the process of deploying troops from Afghanistan, exports could significantly decline in the next five years.
According to Saloojee, the company has nonetheless identified key market areas such as the Middle East, South America and Southeast Asia for future market penetration.
The African market in particular, is showing substantial growth in demand for defence equipment and armaments.
Some of Denel’s cost-cutting measures that contributed to good revenue growth include reducing 11 of its different business entities and condensing them to 6 divisions of the company.
The company’s operation costs are down from 27 per cent to 24 per cent of revenue.
In the past, Denel was structured to unbundle the company and sell off some of its assets to foreign partners.
“The historical debt and the historical losses that we have made in this organisation will take some time to address themselves, but I’m quite confident we’ve made enough inroads at the moment to see the end of the tunnel.”
Denel is the largest manufacturer of defence equipment in South Africa and a major armament manufacturer in the world.