Barloworld is excited about the growth prospects in agriculture in sub-Saharan Africa and is looking to grow the territories where it represents Massey Ferguson agricultural products.
The listed distribution group has also commenced with a supplier diversity programme to ensure its broad-based black economic empowerment (BEE) rating does not drop because of the new codes.
Clive Thomson, the chief executive, said yesterday the group had completed the rationalisation of its international handling operation following the disposal of the Netherlands lift-truck handling business in December last year.
In the past few years Barloworld has also sold its handling businesses in the US, the UK and Belgium in line with its strategy to reallocate capital to higher-return opportunities.
The group has retained its southern African handling business, which includes its agriculture business.
Thomson said it was retaining its southern African fork-lift handling business because it had a much higher market share in the region and much better growth prospects than in the developed markets.
“It’s a small part of the mix but we believe we can build it up again to a bigger contribution within the group. The agriculture business started slowly but is picking up with strong order intake in the last two to three months.”
In the six months to March, the southern African handling business improved its operating margin to 3.3 percent from 2.7 percent and its order book to R217.3 million from R195.6m.
In 2010 Barloworld confirmed its agricultural arm, which already distributed premium tractor brands Massey Ferguson and Claas, planned to also start distributing two ranges of low-cost tractors from India and South Korea.
Thomson said the group’s supplier diversity programme, involving the procurement of cleaning services, stationery, garden services and office furniture, had been prompted by the new broad-based BEE code that combined enterprise development and preferential procurement into enterprise and supplier development.
“It’s probably only in our 2016 financial year that we will be formally assessed but that doesn’t stop us doing work now to position ourselves to score well. We are trying to align with the new codes ahead of requirement so we can maintain our BEE rating.”
A stellar performance by Barloworld’s automotive and logistics division was the driving force behind the financial performance of the group in the six months to March.
Barloworld yesterday reported a 10 percent increase in headline earnings a share to R3.36 from R3.04.
Revenue from continuing operations rose by 5 percent to R29.9 billion.
Operating profit grew by 18 percent to R1.6bn and the operating margin rose to 5.5 percent from 4.8 percent.
The automotive and logistics division grew revenue 11 percent to R15.1bn and operating profit by 26 percent to R775m.
The equipment and handling division, traditionally the group’s biggest, experienced a 1.5 percent decline in revenue to R14.8bn while operating profit grew by 10 percent to R923m. A dividend of R1.06 was declared, 10 percent higher than the 96c declared in the previous corresponding period.
The shares fell 0.52 percent to close at R112 yesterday.