October 31, 2018 / 3:05 PM / 10 months ago

UPDATE 1-South African arms firm Denel eyes turnaround after big loss

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JOHANNESBURG, Oct 31 (Reuters) - South Africa’s struggling state-owned arms firm Denel said on Wednesday that it was working on a turnaround plan that would involve cost-cutting and exploring joint ventures after posting a loss.

Denel, which makes military kit for the South African armed forces and clients in Africa, the Persian Gulf and Europe, is one of several state firms which became embroiled in corruption scandals involving the Guptas, a trio of brothers with close ties to former president Jacob Zuma.

Zuma and the Guptas deny wrongdoing, but their relationship forms part of the focus of a government graft inquiry backed by new President Cyril Ramaphosa.

Denel said the 1.7 billion rand ($115 million) operating loss it made in the 2017/18 financial year - which follows seven years of modest profits - was driven by a steep fall in revenue, higher borrowing costs and foreign exchange losses.

It said its new board of directors, appointed by Ramaphosa in April, had appointed a team of forensic investigators to probe procurement irregularities and that it was working with law enforcement officials to root out corruption.

Denel also said new joint venture partnerships could be set up at a product and divisional level.

It had an order book of around 18 billion rand, despite its financial difficulties, Denel said.

It produces defence equipment from ammunition to weapons and armoured vehicles and already has a joint venture with Germany’s Rheinmetall.

Saudi Arabia recently approached South Africa about an equity stake or partnership deals with Denel. ($1 = 14.8295 rand) (Reporting by Alexander Winning Editing by James Macharia)

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