Kamlesh Bhuckory
BARLOWORLD, the South African distributor of Caterpillar equipment, expects spending by mining companies and governments on infrastructure to boost Africa sales of the machinery by more than 10 percent a year.
“We are still in the infancy of growth of Caterpillar products in Africa,” Barloworld chief executive Clive Thomson said last week. “Anything that is going to require infrastructure build – roads, dams, bridges, ports, harbours, airports, railway networks, new power grids – all require in one way or another our construction equipment.”
Sales of the machinery would probably grow by a percentage in the “strong double digits” over the next five years, Thomson said.
Barloworld sales of Caterpillar equipment rose 30 percent to R25.3 billion in the year to last September compared with an 18 percent increase in total revenue, the company’s annual report shows.
The company has exclusive distribution rights with the manufacturer of heavy machinery in Russia and eight African countries including Zambia and Mozambique.
Barloworld, which also operates car dealerships and a logistics unit, seeks to take advantage of new mining projects in commodity-rich African countries to sell equipment.
It has won a R1.1bn deal from First Quantum Minerals for its Zambia copper projects and a R1.2bn contract from Swakop Uranium to supply drilling and loading equipment in Namibia.
Sales of Caterpillar machinery, including spare parts and services, had a profit margin of 7.2 percent, higher than the 4.5 percent for Barloworld’s automotive and logistics division, Thomson said.
Net income for the six months to March rose 50 percent to R643 million, the company said in a statement last month. Revenue increased 11 percent to R31.3bn, driven partly by the contribution of sales from local distribution units of Bucyrus, bought from Caterpillar last year.
Barloworld was countering the impact of a weaker rand with its exposure to other currencies including the Russian rouble, Thomson said at the time of the first-half earnings announcement.
The rand has fallen 16 percent against the dollar this year, making it the worst performer of 16 major currencies tracked by Bloomberg. The currency was bid at R10.1805 to the dollar at 5pm yesterday, 22.29c weaker than at 5pm on Friday.
Barloworld shares have declined 2.5 percent this year, compared with a 4 percent gain on the FTSE/JSE Africa all share index.
The stock fell 2.18 percent to close at R83.50 yesterday, valuing the company at R19.36bn.
Barloworld’s automotive division manages 45 car dealerships in South Africa, selling vehicles from manufacturers such as Mercedes-Benz, BMW, Audi, Volkswagen and Toyota. – Bloomberg