Metair expects drop in earnings

A 2016 Toyota Hilux double cab. Complexities in the vehicle's production have dented Metair's financial results. Picture: Supplied

A 2016 Toyota Hilux double cab. Complexities in the vehicle's production have dented Metair's financial results. Picture: Supplied

Published Jun 22, 2016

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Johannesburg - Complexities in the ramp up for the production of the new Toyota Hilux dented the financial results of listed automotive component manufacturer and distributor Metair in the six months to June.

Read also: Metair sets sights on becoming a global leader

Metair said yesterday that it expected its headline earnings a share to be between 50 percent and 59 percent lower in the six months to June than in the previous corresponding period. This equates to headline earnings a share of between 45c and 55c in this reporting period compared with 111c previously.

Metair stressed that the group was still in “a redesign, growth and renewal phase”.

It said the group’s “energy storage vertical”, which is a reference to its battery business, was leading the redesign and growth phase, while the “automotive component vertical” was leading the renewal phase.

In a reference to the new Toyota Hilux, Metair said the company had secured the business from its most significant customer for their new light commercial vehicle.

Negative impact

Metair added that the first year in the renewal phase had involved significant volume ramp up complexities and variable manufacturing activity, which had impacted negatively on the results of the automotive component in the short term.

“This, together with an earlier-than-expected model mix change, has affected manufacturing operating efficiencies, resulting in higher operational costs in the automotive component’s business and consequentially group earnings,” it said.

But Metair said a good performance from the energy storage vertical was expected, which would result in improved operating profit for this business compared with the previous period. Metair said that under normal conditions it expected automotive production volumes to stabilise and manufacturing efficiency to improve in the automotive component business during the second half of the year.

However, the company said uncertainty remained, regarding the full-year vehicle volumes and efficiencies, especially with the possibility of industrial action at vehicle and component manufacturers.

Strikes at vehicle and component manufacturers are possible, because both the vehicle and automotive component manufacturing sectors are negotiating new multi-year agreements with unions this year.

Metair’s shares were unchanged on the JSE at R19.20 yesterday.

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