Fitch ratings confirms Denel's financial turnaround and long-term potential
20 January 2014
Denel welcomes the decision by the Fitch Ratings to upgrade the companys long-term rating and affirm its current short-term rating and outlook.
It is a vote of confidence in our prudent financial practices and a clear indication that our turnaround strategy is working and being recognised in financial circles and investor communities, says Riaz Saloojee, the Group Chief Executive of Denel.
Denel is a valuable national asset which contributes more to South Africa than what is contained in its primary mandate to supply the defence community with defence-related technology and solutions, says Mr Saloojee.
We are growing into our role as a technology and advanced-manufacturing powerhouse which also contributes to the broader national objectives of skills development and job creation through its investments in research and development and technical education.
Fikile Mhlontlo, the Group Financial Director says the long-term ratings upgrade to AAA (zaf) from AA- (zaf) is at the back of all time high order cover in excess R20bn, improving financial performance, strengthened balance sheet and continued strong support from stakeholders including Government. It also recognises the success of the financial turnaround which led to Denel reporting profits over the past three years.
It also notes that Denel has managed to diversify its revenue base away from the South African defence sector with 50% of revenue now generated from exports, most notably to the Middle East and Southeast Asia. Fitch Ratings expects the export business to remain an important aspect of Denels revenue growth but cautions that competitive pressure is likely to come from large global contractors.
Mr Mhlontlo says a higher credit rating for Denel will in no doubt result in significantly better access to credit facilities required to execute new significant contracts and lower borrowing costs. Denels national short-term rating was confirmed at F1+ (zaf) and its outlook is described as stable.
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