South African state-owned aerospace and military technology company Denel has reached an agreement to stop manufacturing parts for Airbus A400M military aircraft amid financial troubles.
The deal will move the manufacturing of aircraft parts for the A400M military airlifter back to Airbus.
Denel arrived at the joint decision with Airbus in view of the ongoing strategic review of its operations.
In a statement, Denel said: “The two companies agreed that the continued manufacturing of aircraft parts by Denel is no longer sustainable in its current form. Alternative options are now being considered between the two parties.”
“Denel and Airbus continue to collaborate in other areas and intend to build, expand and strengthen their strategic industrial partnership.”
The South African firm has been designing and manufacturing the wing-to-fuselage fairing and top shells for the A400M aircraft at its facility in Kempton Park.
Airbus also awarded contracts to the company for the vertical tail-plane’s ribs, swords and spars, the cargo deck floor ISO locks and the central guide vertical restraint system.
Denel is currently focused on cutting losses and returning to profitability through a long-term repositioning strategy.
As part of its plans, the company is looking to limit non-core areas of activity and sell core business areas that are not viable.
The firm will focus its efforts on viable core business activities and reposition these areas to leverage capital and market access.
Furthermore, Denel intends to pursue strategic equity partnerships and joint ventures to tap export opportunities.
Denel posted losses of approximately R1.7bn ($117m) in the 2017-18 financial year as the company suffered from mismanagement and poor contract execution that led to liquidity challenges.
The revenue for the year under review declined 38% to R4.9bn ($343.72m) from R8bn ($561.18m) in the preceding year.
In the financial report, the company stated that liquidity problems affected its delivery timelines.