Johannesburg - Denel, the state-owned arms manufacturing company, posted a net loss of R363 million for the year to March.

The company attributed the loss to a massive R429 million write-off on the Rooivalk attack helicopter and restructuring costs amounting to R124.7 million.

Sandile Zungu, the chairman of Denel, said at the weekend that the company's inability to obtain international orders for the Rooivalk was "a real disappointment" but that the group's performance should be seen in the context of a global downturn in the aviation industry and the deteriorating rand.

Zungu remained positive about the future of the Rooivalk, at least on the strength of maintenance obligations under an air force contract.

In 1993 Denel and the air force entered into a contract to produce and develop the Rooivalk on a cost-sharing basis.

It was envisaged that Denel would add a major product to its portfolio, enabling the arms manufacturer to recover investment costs and make a profit through international orders.

Denel's outgoing chief executive, Flip Botha, said: "With international orders not forthcoming, this investment resulted in a major drain on Denel's financial resources and bottom line, due to the fact that all development costs were expensed in the income statement."

But Botha remained upbeat about the future of the Rooivalk, which is regarded as one of the most sophisticated attack helicopters in the world.

Denel increased its revenues by 9.2 percent to R3.9 billion.

In spite of the global slump in the aviation industry, Denel managed to increase its exports to R1.7 billion. Denel's exports are now at 52 percent, from 47 percent last year.

Botha said: "Denel's orders at the beginning of the 2002/03 financial year are already R7.5 billion, with both the aerospace and ordnance groups exceeding 100 percent. A further growth in the export market share is imminent."

Meanwhile, Zungu said the search was on for a new chief executive, because Botha had decided not to extend his contract, which expires at the end of October this year.

With acknowledgements to Khulu Phasiwe and Business Report.