JSE-listed automotive products manufacturer and distributor Metair Investments has reported an 18% decrease in headline earnings a share to 248c a share for the year ended December 31, 2015, lowering headline earnings to R488-million in the same period.

The group also delivered R1.1-billion in earnings before interest, tax, depreciation and amortisation (Ebitda) –  a 6% decline from R1.2-billion reported in 2014.

Metair’s capital structure remained conservatively leveraged at a net debt equity ratio of 29%, which ensured an efficient capital structure without the need to introduce increased levels of financial risk.

Metair MD Theo Loock noted that operating conditions were extremely challenging over the past twelve months, with a mix of prominent political and economic issues impacting on performance across the markets in which it operated.

In particular, the impact of automotive model changes on Metair’s components business in South Africa, as well as the loss of Russian exports as a result of currency weakness and geopolitical tensions, impacted on the group’s operating profit margin, which softened to 10.2%

Meanwhile, last year saw the company successfully launch its Metair International Battery (MIB) brand, as well as the announcement that Turkish battery manufacturer Mutlu Akü was now integrated into the group. Metair also centralised its research and development centre in Turkey.

The company expected the synergistic benefits from the formation of MIB to deliver positive results and was confident that the battery brand could record volume growth in the automotive energy storage sector.

“The group delivered a creditable performance for the year, buoyed by excellent progress on the group strategy, including the establishment of the energy storage business that will drive our goal of becoming a global manufacturer of energy storage solutions,” said Loock.

At year end, group borrowings from third parties increased slightly to R2-billion and the group remained in compliance with all of its lenders' covenants.

Further, the group had access to used facilities of about R3.9-billion as at December 31, 2015.

Consolidated revenue grew 6.3% to R7.7-billion, as the energy storage business grew its market share in Turkey, both in the aftermarket and own-equipment sectors.

The automotive component business grew its product offering through the establishment of the instrument cluster facility.

OUTLOOK
Metair reported that it continued to seek acquisitions, though such acquisitions would only be considered if they met the group’s returns criteria.

The company believed there was potential for new opportunities following the recent resolution of the African Growth and Opportunity Act negotiations, as well as the lifting of sanctions against Iran.

The South African economy, however, was on the brink of a recession and new vehicle sales had fallen by 4% to 589 000 units in 2015. Further, margin pressure in the automotive components business was expected to intensify.

Metair noted additional risk was in the automotive sector’s upcoming three-yearly wage negotiations, which could result in labour unrest.

Vehicle exports, which saw a record low? of 337 748 units in 2015, were expected to increase by 12.5% to 380 000 vehicles in 2016.

Metair predicted that the first six months of the new financial year would be particularly tough as the company ramped up to new model launch production.

Earnings growth was unlikely in 2016 as the group was still processing redesigns and product renewal, driven by model changes.