'Breathing space' for Denel as Fitch upgrades outlook

CEO of state-owned arms utility Denel, Danie Du Toit, has welcomed the decision by sovereign credit rating agency Fitch to affirm Denel’s long-term rating and assign the company a stable outlook.

Denel - which in recent months struggled to pay salaries - has been carrying out its turnaround plan, which most recently included the exit from its aerostructures business. Its reform efforts have also included cutting ties with Gupta-linked VR Laser. 

Fitch Ratings affirmed Denel's national long-term rating at B(zaf) and the national short-term rating at B(zaf), and upped its outlook from negative to stable. 

Sure of government support

In a statement, Du Toit said while the company noted the many concerns about aspects of the business, Denel would continue to implement measures to mitigate these factors.

"We are also heartened by the positive aspects of our turnaround plan that are highlighted in the rating report.

"We are confident that we will receive further support from our shareholder and that we will meet all the expectations of government, our clients and the South African public to turn Denel into a viable business again," said Du Toit.

• READ: Denel takes 'major steps' to limit job losses as it winds up exit from aerostructures business

Du Toit said the rating would give Denel "breathing space" to continue with its efforts to restructure the business, exit from non-core entities and find new markets for its advanced defence and high-technology products and services.

"We are addressing all these issues in a structured manner and with the support of our stakeholders in government. It is, however, clear that the turnaround is gathering momentum and I am confident that this will be increasingly reflected in the views of analysts and the broader business community," Du Toit said.

Du Toit said Denel would take note of concerns about liquidity constraints and poor operating performance of the underlying business units, which have an impact on its short-term risks.

*Compiled by Khulekani Magubane