(Adds CEO comments, trade union)
JOHANNESBURG, May 19 (Reuters) - South African state defence firm Denel said on Tuesday it could not pay salaries for May and wages for June and July were at risk, highlighting the gravity of its financial position.
Denel is one of a number of struggling state enterprises the government has been keeping afloat with bailouts but are now being battered by the fallout from the coronavirus pandemic.
Despite a slight easing of South Africa’s lockdown restrictions this month, Denel is running a reduced operation.
“Denel is not in a position to pay salaries for May. Also the June and July salaries are in serious jeopardy,” Denel said in a message to employees seen by Reuters.
Denel Chief Executive Danie du Toit said in a separate statement the company was in ongoing conversations with the government “to find solutions to the current crisis”.
Trade union Solidarity said Denel had around 100 million rand ($5.5 million) of orders in limbo because export permits weren’t being issued during the lockdown.
“Those are exactly the type of orders that determine whether people can be paid salaries or not,” the union’s defence and aviation sector coordinator Helgard Cronje said.
Denel, which makes military hardware for the armed forces in South Africa and around the world, is awaiting a 576 million rand bailout announced in a budget speech in February, after receiving a 1.8 billion rand bailout last year.
The chief executive is heading an effort to return Denel to profitability with a strategy based on cost-cutting, selling assets and bringing in strategic equity partners.
He told staff Denel had reduced operational costs by 1 billion rand in real terms and had filed at least five applications to the government to sell non-core assets. He asked staff to submit further ideas on how to cut costs.
$1 = 18.2599 rand Reporting by Alexander Winning; Editing by Edmund Blair and Mark Potter