Barloworld revamp complete ready for acquisitions, gains

Barloworld CEO Dominic Sewela. Photo: Supplied

Barloworld CEO Dominic Sewela. Photo: Supplied

Published May 23, 2023

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Barloworld has exited non-core businesses and the focus is on organic and acquisitive growth in its industrial equipment and services and consumer industries divisions, CEO Dominic Sewela said.

The group yesterday reported improved trading activity across most of its operations in the six months to March 31, which with cost containment resulted in a 20.3% increase in headline earnings per share (Heps) to 578 cents.

“The performance cements the decisions with respect to our strategy and focus on the core verticals of industrial equipment and services and consumer industries,” he said in a statement. The interim dividend was raised to 200 cents per share from 165 cents.

Following unbundling and listing of Zeda in December 2022, and the disposal of the remaining logistics business, the key exits out of non-core businesses had been completed, said Sewela.

“The group is now poised on the growth agenda with both an organic and acquisitive growth strategy focused on investing within our core verticals.

“It is also pleasing to see this quality of results despite the many challenges presented by the operating environment,” he said.

In the six months revenue from continuing operations increased 12.9% to R20.8 billion. Operating profit improved 16.5% to R2.1bn

The equipment Southern Africa division benefited from improved operational activity, and to a lesser extent the weaker rand/dollar exchange rate. Activity in the mining sector, fleet replacements, and a good contribution from the Bartrac JV saw the division report a 38.4% and 31.5% increase in revenue and operating profit to R13.1bn and R1.1bn, respectively.

Earnings before interest tax depreciation and amortisation (Ebitda) increased 22.7% to R1.5bn.

The equipment Eurasia division also had a solid first-half supported by demand for after-market products in Russia, and a good performance in Mongolia, which benefited from the opening of the borders with China.

Its overall revenue of $224 million (R4.3bn) was 39% lower than the prior period buffered by the improved contribution margin of Mongolia, as Russia’s revenue fell 53% to $147.5m. Operating profit fell 10.5% to $38.6 m.

In the consumer industries division, Ingrain was supported by higher commodity prices and growth in export volumes, although domestic sales were flat. Revenue rose 15.3% to R3.3bn; operating profit was R331m; and cash generation improved to R127m from R76m. The operating margin decreased from 12.9% to 10.1% due to lower contribution margins, and increased overheads on the back of investments in plant maintenance and critical skills.

Sewela said the total equipment Southern Africa order book was strong at R5.7bn compared to R4.8bn at September 30, 2022, while the Eurasia order book had been impacted by Russia though the business was self-sufficient in terms of its funding requirements.

In the short term, Ingrain’s efforts were to grow domestic sales volumes in response to changing market dynamics and improve operating efficiencies, while managing the expected impacts of the El Niño phase of South Africa’s climate cycle.

The group has significant headroom on committed facilities for local and offshore operations of R7.2bn, excluding the listed bond headroom of an all-inclusive R18bn.

Sewela said they had been able to create jobs for young people internally at Barloworld, and externally through their social entrepreneurship fund, Mbewu and Siyakhula.

“I also look forward to seeing the benefit from our contribution towards the land and 50% of the equity at Barlow Park which seeks to provide access to adequate, safe, and affordable housing in the Sandton precinct,” he said.

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