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Strategic Alliance between Denel and Nitrochemie: Bundling of resources and platforms to strengthen international business ties

Category: Defence Industry

Nitrochemie Aschau GmbH, of Aschau, Germany, has entered a long-term strategic alliance with the South African company Denel Land Systems, Western Cape. Cooperation will focus on the development of improved modular propelling charges for 105 mm and 155 mm cal. artillery systems.

Partner of Denel Land Systems, Western Cape: Nitrochemie Aschau GmbH a leading international supplier of know-how and expertise in the manufacture of combustible cast parts and (modular) propelling charges.

The first jointly developed product is expected to be ready for qualification in 2006. Denel Land Systems, Western Cape, which employs a staff of approximately 1,200, belongs to the Denel Group, one of South Africa's largest aviation and defence technology concerns, employing a total workforce of some 10,700. Nitrochemie Aschau GmbH currently has just under 450 employees.

The strategic significance of the partnership of these two companies, both of them global leaders in the development and marketing of modular propelling charges for 155 mm artillery systems, is explained by Bodo Garbe, a managing director of Nitrochemie Aschau GmbH: "We both assume that there won't be anymore customer-financed development contracts, even though demand exists for new products in the 155 mm and 105 mm field. That's why we're pooling existing technologies and resources in order to develop new products and serve new markets. In this context, the sharing of development and production costs naturally plays a big role, and we'll be using the workshare model."

In practice, Denel Land Systems will focus on the production of propellant powder, while Nitrochemie Aschau will be responsible for the ignition systems. "Who will make the combustible cast parts and be in charge of loading and assembly will be decided on a case by case basis", declares Garbe.

For Nitrochemie Aschau GmbH, which had sales of roughly 62 million in fiscal 2004 (defence sales: approx. 36 million), cooperating with its new South African partner will bring a host of medium- and long-term advantages with regard to products and markets alike. As Garbe points out, "We have the chance to get in on the act with a state-of-the-art modular propelling charge system for 105 mm. Plus we'll be able to widen our customer base. We can also reduce the fluctuations in capacity utilization and achieve cost advantages specific to this alliance."

For Nitrochemie Aschau, which belongs to the Propellants unit of Rheinmetall Detec's Weapon and Munitions division, its partnership with Denel represents a further step in the systematic internationalization of its operations. Within the space of a year, the share of exports in its total defence technology sales (approx. 36 million in 2004) rose from 44% (in 2003) to nearly 90%. Accounting for a considerable percentage of its export sales is the company's strategic partnership with Royal Ordnance Defence Ltd. of Filton, Bristol, a component of BAE Systems, which it entered in autumn 2001; since then, Nitorochemie has served as the UK's sole supplier of multibase powder and combustible cast parts.

Oliver Hoffmann

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