JSE-listed energy storage solutions and automotive components manufacturer Metair saw a strong contribution from its overseas acquisitions in the energy storage vertical, while also being supported by good volume throughput from the automotive components vertical in the year ended December 31, 2018.
MD Theo Loock said the energy storage vertical was particularly supported by Mutlu Akü, in Turkey, which managed to outperform the Turkish lira currency weakness for a fifth year in a row, and Rombat, in Romania, which operated at full capacity in the second half of the year.
The company reported an 8% year-on-year increase in revenue to R10.2-billion and a 19% increase in operating profit to R1-billion.
Headline earnings a share increased by 16% to 327c, enabling the company to declare a 100c a share dividend, which was up 25% compared with 2017.
Loock added that the company had delivered its best results yet in 2018, putting it on a good footing for this year.
PERFORMANCE & OUTLOOK
The energy storage vertical achieved growth in revenue of 3% to R6.38-billion and increased its profit before interest and taxes (PBIT) by 17% to R692-million.
Loock noted that exports had improved, in line with Metair’s long-term strategy, as a result of two automotive supply contracts with strategic aftermarket customers, one being in the US.
“Despite challenging global political and trade conditions, Mutlu Akü continued its resilient in-country performance, delivering a 27% increase in turnover and a 55% increase in profitability owing to margin expansion from increased exports, good cost management and price recoveries, which offset the Turkish lira currency weakness.
“This translated into an improved operating profit contribution of R428-million,” he explained.
Rombat performed well, with an in-country increase in profit of 29%, translating into a profit contribution that increased by 31% to R87-million.
Loock further said the turnaround at First National Battery was going according to plan, with the business having delivered improvements in manufacturing and marketing efficiencies, while investing in promoting the First National Battery brand and retail network, combined with customer focused improvement plans to increase localisation.
First National Battery delivered a 6% improvement in PBIT to R162-million, despite the second half being negatively impacted on by labour instability linked to bi-annual wage negotiations.
Volume growth, underpinned by higher levels of exports, continued expansion and deepening of localisation, and efficiencies derived from production and labour stability, resulted in the automotive components vertical achieving a 16.3% rise in revenue to R5.07-billion and a “pleasing” 16.5% increase in PBIT of R509-million.
Meanwhile, in February 2018, Metair acquired a 35% shareholding in Prime Motors, which is being geared to be Metair’s incubator and research and development centre for lithium-ion battery development.
Loock said the reporting period was eventful for Prime Motors, which profitably moved from pre-sales to first customer engagement and sales. It secured its first lithium-ion coating and cell assembly manufacturing line, developed a low temperature lithium-ion starter battery, received its first request to quote for lithium-ion starter batteries and supplied several lithium-ion battery pack solutions, while launching the first electric vehicle business in Romania in partnership with Rombat.
The next step to accelerate this businesses growth was for the installation and commissioning of the lithium-ion line to be approved by the investment committee.
Metair CFO Sjoerd Douwenga noted that Metair has committed R80-million for the completion of its technology investment into a lithium-ion coating facility and, therefore, has total investment provisionally approved for the lithium-ion coating line of R130-million.
Loock noted, meanwhile, that Metair was pleased with its international investments.
“Aside from the great performances out of Turkey and Romania, we have seen the benefit of technology transfer through the partnership with Prime Motors. Moll Germany has taught us a valuable technology lesson, introduced us to a major German original-equipment manufacturing customer and presented our first lithium-ion starter battery opportunity.”
Metair’s latest strategy review has shown that it will best secure global relevance by fully using its current lead acid base energy storage businesses while engineering a cost-efficient way of gaining relevance with alternative lithium-ion technology product solutions.
“The benefit of such a technology-focused strategy is that it is possible to gain customer takeoff and investment support agreements prior to any major capital commitments in new technology manufacturing facilities. It also aligns with Metair’s European customers’ call for dual technology solution providers,” added Loock.
Looking ahead, he commented that geopolitical uncertainty and wage negotiations were expected to have an impact in South Africa and Turkey, driving concern around consumer confidence and labour volatility.
“We do expect favourable conditions for our automotive components business in the short to medium term, based on the increased stability and certainty brought about by the extension of the Automotive Production and Development Programme, the conclusion of the South African Automotive Master Plan, as well as expected record vehicle export levels.
Douwenga noted that original-equipment manufacturer production in South Africa had been up 4% in 2018, compared with 2017, while Metair’s major customer volumes increased by 16%.
“We are well positioned to benefit from the shift toward increased connectivity, innovation and full electric vehicles. Our focus is on expanding our aftermarket lead acid battery export customer base, including production of customer branded aftermarket product requirements, and improving First National Battery’s performance in South Africa,” said Loock.
Meanwhile, Loock said South Africa could be a “winner” in the trade war between China and the US, because no one wanted to lose access to African markets, to which South Africa is often the gateway. He added that South Africa also has good trade agreements in place, which improves the ease of doing business in the automotive components and energy storage solutions industries.