South Africa is positioning itself to enter the world's lucrative arms trade.

South Africa's largest arms manufacturer, the state-owned company Denel, has had a profitable year, racking up profits of $16.5 million in profits in the year to date.

Denel's Group Executive Officer Talip Sadik noted this was the first time in a decade that Denel has achieved such results, BuaNews news agency reported.

"We are pleased with our results, in particular that the business generated cash from operations of $26.4 million," Sadik said.

"The good results are an indication that Denel is on a path to self-sufficiency, prosperity and sustainability. Denel is actively looking at strengthening its presence in its existing, high growth markets and seeking new markets and new clients."

Addressing Denel's debt levels, Denel Group Financial Director Fikile Mhlontlo said that the funding balance had remained at $275.3 million, resulting in annual interest charges of $17.5 million.

"We are engaging the shareholder with a view to restructuring the funding balance in order to reduce the interest burden," Mhlontlo said. "As a global trading company with nine entities and three associate companies, we are a key player in the development of South Africa's advanced manufacturing, industrial and technology base."

Denel's output is primarily directed to meet the requirements of the South African military, which recently purchased state-of-the art Rooivalk helicopters manufactured by Denel.

As for the future, Sadik said Denel had nearly $744 million in export contracts on its books and that this included the largest export order secured in Denel's history.

Sadik declined to provide further information on the massive export contract, stating that details would be revealed later.

While some of Denel's new clients include Middle Eastern and Far Eastern nations, Denel made it explicitly clear that none of the contracts included Libya.

Denel Group Executive for Business Development and Corporate Affairs Zwelakhe Ntshepe said: "We have not been selling to Libya. Libya is a closed market to us."

He added that the National Conventional Arms Control Committee would never approve a contract with a country in conflict.

Beyond strictly military hardware, Denel has diversified its output into civilian applications such as civil security, crime prevention, improving workplace safety and productivity and rendering support to the mining and electronic sectors.

Analysts rate the quality of Denel's products as comparable with equivalent products of defense industries in the leading developed countries while in certain niche areas, such as mine-protected vehicles.

South African industry led the world during the 1980s, when sanctions forced the apartheid government to develop its own indigenous arms industry.

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