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Interest, tax weigh on Metair

File photo: AFP

File photo: AFP

Published Aug 19, 2015

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Johannesburg - Metair expects to have a challenging second half after reporting lower after tax profit in the first half because of higher tax spend and interest charges.

In the six months to June, the listed automotive aftermarket supplier said group revenue gained slightly to R3.5 billion from R3.2 billion, and its operating profit also improved. However, after tax profit dropped to R236.4 million from R250.9 million.

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Although it experienced good results in the local, Romanian and Turkish aftermarkets - with volumes up 7 percent and margins gaining to 13.4 percent from 11.1 percent - this was offset by a decline in export operating profit.

It says volumes declined by 179 780 units, or 18 percent, mostly because it lost the Russian aftermarket.

Excluding Russia, and intercompany sales, export volumes were largely flat. Original equipment segmental results retracted by R16.2 million during the period as a result of a 6 percent decline in a major customer's volumes combined with project costs of some R20 million associated with new model launch preparation, it said.

Its operating profit - or earnings before interest, tax, depreciation and amortisation, went from R484.6 million to R502.1 million, but increased interest charges and higher taxation expenses resulted in attributable profit after tax declining by R14.6 million to R236.4 million.

Metair explains the net interest charge increased by R9.8 million because of a higher average net debt position in 2015 after it bought out minorities in Mutlu Akü. Net debt was R1.7 billion at the end of June compared with R1.3 billion at year-end.

The listed company bought a majority stake in Mutlu Akü, Turkey's largest battery manufacturer and distributor, in 2013. It has now increased its stake from 96.7 percent to 100 percent and delisted the company after buying out minorities.

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Metair manages an international portfolio of companies that manufacture and distribute products predominantly for the automotive industry. It started life more than 30 years ago as a supplier to Toyota SA, which was then a sister company. Today, it produces and supplies components to all of the major original equipment manufacturers (OEMs) in South Africa, as well as Renault Dacia in Europe through its Romanian subsidiary, Rombat.

The group also manufactures and distributes spare parts for use in the motor vehicle aftermarket, and non-automotive products for various other sectors of industry.

It says, looking ahead, that new local model launches in SA could provide long-term opportunities for growth, while original equipment production in Turkey and Romania remains positive.

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In its statement to shareholders it adds aftermarket demand in Romania and South Africa should remain stable, although second half seasonal winter demand in Turkey depends on climatic conditions in the forthcoming period. Aftermarket exports to Russia will depend on demand returning for imported products.

Overall, it notes the second half of the year tends to reflect the seasonal increase in aftermarket battery demand from the northern hemisphere but, in the light of the anticipated impact of major vehicle model changes in South Africa, the second half is expected to be challenging.

Its results will depend upon aspects such as model change effect, exchange rates, volumes, commodity price movements, seasonal winter demand and geopolitical conditions it says.

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