* Targeting India, Brazil for non-NATO markets expansion
* Looking at expansion in commercial space in the U.S.
* Shares rise as much as 5 percent
(Adds CEO comment; updates share move)
By Aashika Jain
April 24 British defence contractor Chemring
Group Plc said it would sell its European munitions
business to France's state-owned Nexter Systems SA for up to
167.8 million euros ($232 million) to focus on its core defence
Chemring, whose profit has been hit by budgetary cuts in the
United States, has been selling its non-core businesses since
last year and pushing into non-NATO markets.
Chief Executive Mark Papworth told Reuters on Thursday that
the company is targeting India and Brazil for expansion of its
highest margin business, Sensors & Electronics.
The division makes detection systems for IEDs, chemical and
biological threats, detonators and interception equipment.
Papworth, who began a restructuring of Chemring's businesses
last year, said the company is looking at expanding in the
commercial space in the United States as its traditional markets
The United States accounted for 45 percent of revenue in the
year ended Oct. 31, while Europe and the UK together brought in
Chemring's defence technology business would now have three
divisions, Sensors & Electronics, Countermeasures and Energetic
Systems. The company said it would merge the remaining
pyrotechnics and munitions products business with its Energetic
The company, which also makes ejector seats for fighter jets
and decoy flares used to counter heat-seeking missiles, said the
sale of the business, Mecar and Simmel, is unlikely to lead to
further reduction in order volumes.
The pyrotechnics and munitions division accounted for 32
percent of total revenue in 2013.
Chemring said it would use the expected cash proceeds of
131.4 million pounds to reduce debt by 120.4 million pounds to
128.3 million pounds.
"This (reducing debt) is positive, in our opinion, as it
reduces balance sheet risk and provides management with
flexibility to address tough defence end markets," analysts at
Investec Securities wrote in a note.
The analysts said the management was making good progress in
implementing its strategic plans, and improving Chemring's
position in a difficult market.
Chemring said it expects to incur a loss of about 61.4
million pounds ($103 million) from the sale.
Nexter Systems, a weapons manufacturer whose munitions
business line specialises in artillery, tank and medium-calibre
munitions, reported revenue of 787.3 million euros in 2013.
The company's shares were marginally up at 239.25 pence at
1338 GMT. Shares in the company, which slipped out of the
FTSE-250 Midcap Index last year, rose nearly 5 percent in early
($1 = 0.72 Euros)
($1 = 0.59 British Pounds)
(Reporting by Tasim Zahid and Aashika Jain in Bangalore;
Editing by Gopakumar Warrier and Sriraj Kalluvila)