ARMS manufacturer Denel says its failure to secure a lucrative $2,5bn deal to supply Turkey with 50 attack helicopters does not mean the end of the road for the state-owned company.

It says the many months of working in Turkey put Denel in a position to “explore many other business options with Turkey”.

These included collaboration with Turkish industry in areas such as missile development, munitions, artillery technology and clearing land mines.

The failure to clinch the Turkish contract could unfortunately spell a swift death for Denel’s attack helicopter, the Rooivalk.

Denel CEO Shaun Liebenberg told the Financial Mail last week that Eurocopter, a European company that provides gearbox and other dynamic components for Rooivalk, had given Denel notice that they would not support any further sales of Rooivalk anywhere in the world.

“That means we will never sell another Rooivalk anywhere, ever,” Liebenberg was quoted as saying.

He suggested that the South African Air Force may also be forced to scrap its existing fleet of 12 Rooivalks.

“If you can’t sell more, then there’s no sense in keeping the technology. The challenge is that we’ve got 12 Rooivalks sitting with the air force, which we are having to upgrade continuously. You cannot afford to do that for just 12 aircraft for another 25 years; it’s not financially feasible,” Liebenberg said.

He has, however, denied speculation that Denel’s technology was getting outdated. “Rooivalk technology remains state of the art because subsystems are continuously updated to the latest standards.”

The Rooivalk, which has struggled to attract customers since its inception in the mid-1980s, cost Denel about R100m a year just to maintain the staff, resources and the capabilities available. About R8bn has been spent on the project to date.

This expenditure, coupled with huge financial losses that Denel had suffered over the past 10 years, had prompted the Democratic Alliance (DA) to call for the privatisation of the company.

Denel last posted a net profit in 2001 when it recorded R24,1m. The only other profit recorded in 10 years was in 1997, with a healthy R81,5m.

The DA says: “The path to profitability for Denel lies in radical restructuring, selling off of noncore assets and/or partprivatisation.”

But Liebenberg says his management team has embarked on a “macro strategy” to refocus and turn it around in the next four years. The plan includes disposing of noncore operations and creating up to 10 niche market business units in the company.

Noncore assets earmarked for disposal are property group Bonaero Park, soy-based food producer SPP, technology group Cosource and vacant land within the OR Tambo International Airport precinct.

Key operations such as ammunition maker Pretoria Metal Pressings (PMP) are showing signs of recovery.

Denel says PMP secured “a major contract” to supply the defence force and the police with a total of 26-million rounds of 9mm and 5,56mm bullets.

A rise in the local game hunting market also augurs well for the future of PMP. “This ensures the retention of scarce skills and provides jobs for around 1600 employees,” says Denel.

Collaboration with international defence companies was also part of Denel’s strategy.

The company is involved in joint ventures in Europe, Australia, the Middle East, Asia Pacific and the Americas.

“With its technology edge or specific production capabilities in several niche areas, Denel meets the prerequisite to act as a specialised contractor that could slot into the value chain of the global players,” Denel says in its 2006 annual report.

With acknowledgements to Khulu Phasiwe and Business Day.