State-owned arms company Denel signed a renegotiated agreement with Airbus Military yesterday in a deal set to make a "major contribution towards turning the company around", Denel Aerostructures CEO Ismail Dockrat said.

Denel Aerostructures incurred losses over the past five years because of the global financial recession, development costs and "some operational weaknesses" that had since been addressed, he said.

Denel Group CEO Riaz Saloojee said the renegotiated agreement to manufacture components for the Airbus A400M, along with the company’s restructuring process, would enable Denel Aerostructures to return to profitability within three to four years.

The company manufactures two major work packages on the A400M — the wing-to-fuselage fairing and the top shells — both of which form part of the aircraft’s mainframe. Denel could not attach a monetary value to the deal, saying it was an agreement to supply.

Also speaking at the signing ceremony, Public Enterprises Minister Malusi Gigaba said that the agreement would help Denel win more global and domestic tenders. He said Denel Aerostructures had played a "critical role" in fulfilling SA’s industrial policy objectives as it contributed to advanced manufacturing, skills development and employment creation.

"Aerospace is one of the most effective sectors for the generation of industrial technology and the development of technical skills to drive economic development."

Mr Gigaba said the aerospace sector was identified by the government as one of the sectors with the potential "to change the structure of the economy".

He said the partnership with Airbus, in effect since 2005, also contributed towards innovation and hi -tech exports that diversified Denel and SA’s product offerings.

Denel Aerostructures’ restructuring had seen it go through a difficult period between 2009 and last year. But the company made efficiency gains while being on a "steep learning curve", Mr Gigaba said.

Antonio Rodriguez-Barberan, senior vice-president of Airbus Military, said his company was "discussing additional contracts" with Denel that may see the South African company having "increased participation in the A400M".

He said while Denel had gone through "some dire straits in the past", the company had a "very good reputation in manufacturing".

Airbus Military’s strategic interests on the African continent meant Denel and SA were "a fantastic platform to export into sub-Saharan Africa", he said.

Mr Dockrat said the agreement gave "long-term contract stability" and a strong signal to the market that Denel was reliable and "open for business". The company had already ramped up its production of parts for the A400Ms that would be delivered to customers in the coming months, he said.