Johannesburg - Barloworld, the listed distribution group, is undertaking a strategic review to look at growth opportunities in markets adjacent to its existing businesses, as well as new business areas.
Chief executive Clive Thomson said yesterday that the aim was to complete the strategic review by February or March.
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An example of such opportunities was the acquisition in May by the group’s automotive business of Salvage Management and Disposals, the largest salvage operator in South Africa.
Expanded
Barloworld’s logistics business had also started off with a transport business, but then had gone into supply chain management, which involved warehousing and distribution, and had expanded further into freight forwarding.
“There are other opportunities, like that across all our businesses, that we are looking at,” Thomson said.
The group also believed that it was at the bottom of the mining cycle and would need cash as it went into an organic growth phase.
It had over the past few years highlighted a number of planned surface mining projects in southern Africa up to 2020, but there had been some significant delays in the commencement of these projects.
However, Thomson said Barloworld’s equipment southern Africa division had already taken a $20 million (R288m) order for mining trucks and a shovel on one project, and been awarded a contract for four mining trucks on another project.
“We are seeing for the first time in four years certain green shoots evident in the mining sector... (and) early signs of some of these projects actually coming to fruition.
“This will bode well for an underpin to our (equipment southern Africa) revenues in 2017,” he said.
The order book of Barloworld’s equipment southern Africa division, the group’s largest division, declined to R1.3 billion in the year to September from R1.7bn in the previous year.
Thomson said they also believed the group’s equipment after market activity would be higher next year on the back of the average age of mining equipment fleets in the southern African region.
He said a mining truck would typically last up to 10 years and the average age of fleets now across southern Africa was “nudging eight years”. This meant mining companies would not be able to run these fleets much longer.
Decline
A significant decline in income from Barloworld’s associate in the Democratic Republic of Congo (DRC) to R13m in the year to September from R265m, dented the group’s financial performance.
The decline in income from the DRC associate was caused by a temporary cessation of mining activities by one of the group’s largest customers.
Barloworld reported a 3 percent growth in headline earnings a share to 838c for the period. However, if the impact of the broad-based black economic empowerment charge in the previous year was excluded, headline earnings a share declined by 9 percent.
Revenue rose by 6 percent to R66.5bn from R62.7bn. Operating profit improved by 4 percent to R4.1bn from R3.9bn.
Thomson said the highlight of the results was the increase in cash generation from operations to R7.8bn from R1.1bn. An unchanged dividend a share of 345c was declared.
Shares in Barloworld rose 6.81 percent yesterday to close at R93.98.
BUSINESS REPORT