S.Africa's Denel targets global missile market CAPE TOWN (Reuters) - South Africa's struggling state arms manufacturer Denel hopes to penetrate the global missiles export market, banking on the industry's growth in its bid for a turnaround, a government official said on Monday.
Vimla Maistry, chief spokeswoman for the Department of Public Enterprises, said the loss-making artillery, small arms and guided-missile weapons producer aimed to start studies on boosting its export performance in the first half of the 2008/9 financial year.
"The research is likely to focus on global market data, challenges, targets, strategic and financial benefits and export incentives," Maistry told Reuters via e-mail.
"The global market for air-to-air missiles is expected to have the strongest growth rate," she said, without elaborating.
Denel has had limited success so far but has secured export orders to Finland and Algeria.
According to the Teal Group of aerospace and defence analysts, some 600,000 missiles valued at close to $104 billion will be built worldwide from 2006 through 2015, with the air-to-air missiles sector alone worth $9.6 billion.
A South African national treasury document projects Denel to achieve a positive earnings before interest and tax (EBIT) margin by 2010/11, with a corresponding gross profit margin of 25.5 percent.
Denel has slashed costs and restructured its operations over the last few years, selling off some units and entering into joint ventures to try and cut its losses. It has received billions of rand in state assistance as it tries to return to profitability.
Maistry said competing with the likes of U.S. defence contractor Raytheon Co would be difficult.
"A challenge identified is that the global missiles market is quite closed and is dominated by a few consolidated contractors that supply their home markets," she said.
In 2007, Denel lost out to Italy's Agusta in a $2.7 billion contract to supply Turkey's airforce with up to 50 Rooivalk helicopters, which some military analysts bracket in the same category as America's premier Apache attack helicopter.
"It's going to be difficult to break into the missile market dominated by American and European consortiums," said Helmoed Heitman, a military analyst with Jane's Defence Weekly.
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