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Rheinmetall Denel Munition (RDM) releases annual results for the year ended 31 December 2009

Denel’s strategic equity partner, Rheinmetall Denel Munition, turns significant profits and ensures sustainability

25 March 2010, Centurion. Denel’s associate, Rheinmetall Denel Munition (RDM) released its financial results for the 2009 financial year today. RDM, a strategic equity partnership (SEP) between state-owned defence and technology company, Denel, and Germany’s Rheinmetall Waffe Munition GmbH (RWM), successfully managed a profit of R89m before interest and tax, with R53m cash on hand after major investment outflows.

According to Talib Sadik, Denel Group CEO, the conclusion of the strategic equity partnership that resulted in RDM (49% of which is owned by Denel and 51% by RWM) in 2008 has seen the company’s profitable turnaround within the first full financial year, “The company has realised growth opportunities as a result of major export orders received.” With a significant focus on aligning processes and reporting structures with those of RWM in order to achieve synergies, as well as an increase in its order book by using RWM’s international sales machinery, RDM has built up a record order book of R2,2bn. RDM has commenced an investment programme of R300m to modernise plant and equipment to achieve world-class standards; focusing on improving quality and safety, as well as the environment. The company’s improved performance benefited the South African downstream defence-related industries through increased orders, while achieving world-class productivity improvements.

“RDM has benefited from the implementation of select RWM management practices. Reporting systems focused on key performance indicators have been introduced and are monitored regularly, enabling us to identify challenges and deal with these pre-emptively. Marketing efforts have also seen significant support from RWM to ensure that we achieve sufficient order cover for RDM,” explains Norbert Schulze, CEO of RDM. “Our current investment focus has been on investing in modern equipment. This will have a positive spin-off for our customers, ensuring quality and the prompt delivery of all products ordered from RDM.”

RDM is a strategic supplier to the South African National Defence Force (SANDF), receiving considerable orders for a range of products. The company also acts as a springboard for growth in the broader local manufacturing industry as a result of outsourcing to smaller manufacturers. Its increased export revenue therefore has a wider benefit for South Africa. The past year saw R33m invested in research and development (R&D) alone, ensuring that the company’s competitiveness is further enhanced.

Schulze explains that one of the primary objectives of the SEP with RWM was to enhance RDM’s local expertise, “Whilst truly demographic representation remains a challenge for the company, our skills development programmes are aimed at providing a meaningful solution and ensuring true empowerment.” RDM’s skills development programmes currently comprise legislative training, development of core skills (through learnerships, apprenticeships, and workplace experience) and internal bursaries (to the value of R4,5m over the last financial year). They have collectively improved the company’s transformation profile, with 75% of training candidates being previously disadvantaged individuals.

Rheinmetall’s worldwide marketing structure has enabled RDM to take full advantage of international selling opportunities – to which global markets have responded positively with Europe, Asia and the Middle East (through an alliance with Burkan Munition Systems) all expressing increased interest in its local products. The United States (US) and United Arab Emirates (UAE) both contributed significantly to the orders received by RDM in FY2009 – demonstrating how the SEP has effectively increased access to global supply chains and markets. This is in line with Denel’s turnaround strategy.

Sadik concludes that the positive results achieved by RDM – despite the global recession – demonstrate the power of harnessing collective strengths and innovative strategies to impact on the local economy, contribute significantly to South Africa’s manufacturing industry and ensure sustainability of decent jobs.

Ends.