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Metair successfully navigates challenges to generate record earnings

METAIR, the listed battery and automotive components maker, said while vehicle production to meet local demand was likely to be flat this year, demand for vehicle exports, particularly to Europe, in some cases exceeded demand. | Supplied

METAIR, the listed battery and automotive components maker, said while vehicle production to meet local demand was likely to be flat this year, demand for vehicle exports, particularly to Europe, in some cases exceeded demand. | Supplied

Published Mar 18, 2022

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METAIR Investments, the international motor component group lifted headline earnings a share 139 percent to 354 cents a share in the year to December 31, its best ever results, boosted by a strong recovery in its energy storage businesses.

Chief Financial Officer (CFO) Sjoerd Douwenga said the results were achieved despite the low base of the Covid pandemic impact results in 2020, and it had indicated the stability of the energy storage business despite a very challenging environment.

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Chief executive Riaz Haffejee said, however, they continued to trade in a challenging trading environment, including the supply chain challenges and semiconductor shortages, both of which were now compounded by the Russia/Ukraine conflict.

He said they sell a small volume of batteries to the after-part market and to a vehicle manufacturer (OEM) in Russia. The OEM was currently closed. The peak sales season for the after-part market was towards the end of the year, and Metair was monitoring the situation, and also working to find alternative markets for those volumes.

He said while vehicle production to meet local demand was likely to be flat this year, demand for vehicle exports, particularly to Europe, in some cases exceeded demand.

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Demand would be boosted by new models, business and facelifts. “OEM production is expected to grow with an increased focus on local production and I am confident our ongoing investments will deliver returns and drive meaningful value creation over the short to long term,” he said.

He said they were forced to spend some R150 million on airfreight due to supply chain issues, where normally, they never needed to rely on airfreight. These problems started improving toward the end of last year but were still not resolved.

Metair was holding bigger inventories to mitigate shipping delays and freight costs, with net working capital increasing 18 percent to R2.2bn as a result. There was R962m cash at the end of the period and debt increased to R1.3bn from R805m.

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“We have financing facilities in place to support operations as well as our expansion programmes, and our strategic build-up of inventory will provide a buffer against ongoing supply chain challenges,” said Douwenga.

Group revenue increased 23 percent to R12.62bn. Operating profit was up 107 percent to R1.16bn. The dividend was lifted 20 percent to 90 cents.

The Energy Storage vertical performed ahead of its recovery plan and auto battery sales increased 18 percent to 8.8m units, with revenue of R7.6bn showing the same level of increase.

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The volumes beat 2019 levels, supported by strong aftermarket demand and exports from Mutlu Akü in Turkey.

Industrial battery sales were steady at R530m with First National Battery continuing with its shift to a trade-focused model.

The Automotive Components vertical contributed R6.7bn in revenue, a 36 percent improvement. Operating profit increased to R257m from R88m.

This was despite the global supply chain disruptions and production interruptions due to the steel industry strike and July civil unrest, as well as project costs to support future growth.

The recovery in Automotive Components was more protracted with the strong growth in customer volumes in the first half not repeated in the second half.

Expansion works at Hesto were on track. Capital expenditure totalled R575m with a portion of the planned spending rolled over into 2022, due to the impact of global supply chain shortages and shipping delays.

For 2022, just over R1bn would be invested in expansion, maintenance, and health and safety. Capex allocated for the Automotive Components vertical had increased, to invest in planned new business, new model launches and facelifts.

The volume outlook for the Energy Storage vertical remains positive given increased demand for absorbed glass mat batteries across all channels.

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