Johannesburg - Barloworld, the South African distributor of Caterpillar equipment, is lengthening the maturities of its debt at costs lower than two years ago, as revenue growth overshadows labour unrest at mines.
The company, which has exclusive distribution rights for Caterpillar equipment in eight African nations and in Russia, last week sold R714 million of floating-rate bonds due in 2018 at 148 basis points above the three-month average of the Johannesburg interbank agreed rate (Jibar).
That compares with five-year bonds that Barloworld sold in June 2011, which were priced 155 basis points above Jibar. Mining logistics competitor Eqstra Holdings’ five-year debt maturing in April 2018 was priced at 252 points above the agreed rate.
Before last week’s auction, Barloworld had issued R6.24 billion of notes this year. For the fiscal year to September 2014, the company might issue a further R600m worth of debt, it said on Monday.
Barloworld is expanding into the logistics and car rental industries amid lower orders for Caterpillar equipment from the mining industry. The company, which is paid in dollars, is also benefiting from the rand’s slump against the US currency.
“The credit metrics have improved. We are comfortable that they will adequately service their debt,” Bronwyn Blood, a portfolio manager at Cadiz Asset Management in Cape Town, said on Tuesday.
“Their mining operations are not as strong as they were, but are being balanced by the automotive and logistics divisions. They also benefited from their global diversification and the recent rand weakness.”
A spokeswoman for Barloworld did not respond to requests for comment.
“Infrastructure and construction activity across southern Africa has shown some resilience despite relatively muted activity levels in South Africa,” Barloworld said in its full-year earnings statement on November 18.
“Angola has experienced a strong increase in revenue as a result of the various infrastructure developments under way in that country.”
Barloworld generated sales of R30.7bn from equipment and handling for the mining industry in its most recent fiscal year, compared with R34.4bn from automotive and logistics.
The company’s ratio of debt to annual earnings before interest, tax, depreciation and amortisation fell to 2.13 times from 2.32 times the previous year. - Bloomberg