Buoyed by mining recovery, Barloworld looks to Mongolia for growth www.m.miningweekly.com
Barloworld’s results on Monday reflected some of the biggest trends in the South African economy, with the company reporting a sharp drop in equipment sales to the troubled construction industry, as well as a decline in new-vehicle sales and car rental days, but with the mining industry seemingly lifting its head.
The equipment and logistics company reported a 1.6% drop in revenue for the six months ended March 31, to R30.4-billion, compared with the same period in the 2018 financial year.
Operating profit declined by 4%, to R1.9-billion.
The Equipment Southern Africa business saw a 15.7% jump in revenue, to R10-billion, driven by a 32.2% growth in machine sales.
Operating profit was up 9.8%, to R806-million.
Sales to the mining industry grew from 20% of all equipment sales in the previous comparable period, to 24%, with sales to the contract mining industry growing from 14%, to 30%.
Sales to the construction industry shrunk from 52%, to 40%.
Equipment Southern Africa CEO Emmy Leeka said on Monday in Johannesburg that he expected commodity fundamentals to remain favourable, and to support continued recovery in the mining industry.
In the construction industry, however, Leeka anticipated trading conditions to remain challenging in the second half of the financial year.
As for Equipment Russia, revenue was down 22.7%, to $229.3-million, with operating profit down 9.4%, to $22.3-million. This was largely owing to significant package-mining-machine deals sealed in the previous comparable period.
Looking ahead, Equipment Russia CEO Quinton McGeer expected increased customs duties on US sourced units to impact large future mining product opportunities.
“This is something we need to plan for.”
Barloworld CEO Dominic Sewela said on Monday that the company had, in pursuit of growth and to use its strong balance sheet, entered into negotiations to acquire Wagner Asia Group, a Mongolia based equipment dealer.
“For us, as from this year, we are really focusing on growth.”
Barloworld’s Automotive business saw a 7.7% drop in revenue, to R14.2-billion, with operating profit up 0.2%, to R885-million.
CEO of this business, Keith Rankin, said the car rental market declined by 2% in rental days in the period under review.
Barloworld also saw a 6.3% decline in new units sold for the six months ended March 31. Around 20% of Barloworld’s new-car sales are in the premium market, which has been exceptionally hard hit in the current economic environment.
Rankin expected rental days to remain under pressure in the second half of the year. Difficult market conditions in the new-vehicle market would also continue.
Rankin is set to depart his position at Barloworld, with Logistics business CEO Kamogelo Mmutlana to add the automotive portfolio to his job description.
Logistics saw a decline in revenue from R3-billion to R2.9-billion, with operating profit down from R99-million, to R68-million.
The bulk of the losses flowed from KLL, which had a R66-million impact on Barloworld’s results in the period under review.
KLL has since been closed.
Looking ahead at the business conditions facing Barloworld, Sewela expected more of the same for the next six months.
Equipment sales should remain strong, while the South African consumer, however, would remain under pressure and unlikely to experience any financial relief.