Johannesburg - Local fund manager ClucasGray is betting that metal manufacturing companies in South Africa will benefit from changes to the EU’s vehicle emissions legislation.
Hulamin, Africa’s biggest producer of fabricated aluminium goods, was set to gain as European car manufacturers shifted to body parts made from the metal before regulations that would come into effect in 2017, Brendon Hubbard at ClucasGray said this week.
Metair, which supplies parts including fuel-saving stop-start batteries to car makers, has recently expanded into Europe by buying battery makers in Romania and Turkey.
“Hulamin will be a beneficiary of the introduction of hi-tech materials in motor vehicles ahead of the EU’s carbon emissions legislation set for 2017,” Hubbard, who helps to oversee R468 million in assets, said.
“It has been an unloved business and has the ability to rejuvenate itself.”
Rules in Europe, which is home to two of South Africa’s five biggest trading partners in Germany and the UK, will require motor manufacturers to switch to lighter car parts and frames, according to the EU’s website.
The regulations will cut average carbon dioxide emissions from new vans sold in the EU by 14 percent.
Shares in Hulamin and Metair have risen more than the JSE’s all share index this year.
“Hulamin is supplying a growing volume of rolled and extruded product to local motor manufacturers and expects that to grow further as demand expands,” chief executive Richard Jacob said this week.
Companies that Hulamin supplied were involved in Africa’s burgeoning consumer market, particularly in packaging, he said.
Beer drinkers switching to cans from bottles were also pushing up demand for aluminium, Hubbard said.
Metair bought a majority stake in Romania’s largest lead-acid battery maker, Rombat, for e42.8 million (R626m) in 2012.
The company purchased all of Turkey’s Mutlu Holding and 45 percent of Mutlu Plastic for $217m (R2.3 billion) in October last year, funding the transaction through new debt and equity.
“If you buy Metair today, you stand a good chance to buy into an original equipment manufacturer for the large car manufacturers in South Africa,” Cobie Legrange, a strategist at ClucasGray, said.
Metair’s battery technology that switched off when a car engine idled or decelerated “will appear in new Mercedes Benzes and this could very well extend to other manufacturers”, he said.
Hulamin inched up 0.29 percent to R6.90 on the JSE yesterday, extending its gain this year to 34 percent. Metair gained 5c to R42.85, taking its increase this year to 8.1 percent.
Those moves compare with a 5.9 percent advance in the JSE’s 105-member fledgling index and a 4.7 percent climb in the all share index. – Bloomberg