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Turkish delight offsets African headache for Metair

18th August 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Component manufacturer Metair on Monday reported a 32% increase in revenue for the six months ended June 30, to R3.23-billion, compared with the same period last year. Operating profit was up 16%, to R319-million.

These interim results included the first full-period contribution from Turkish acquisition, the Mutlu group (Mutlu).

Mutlu is a lead-acid battery manufacturer and distributor in Turkey and the Middle East. Metair acquired the group in December for R2.9-billion.

“Mutlu delivered an outstanding first-half performance which supported the group’s overall results,” said Metair MD Theo Loock.

Mutlu recorded an 856.9% increase in profit after tax, to R68.9-million, for the six months ended June 30, compared with the same period last year.

“The integration of Mutlu is progressing according to plan. [Mutlu] remains a key pillar of Metair’s strategy to derive 50% of business from original-equipment manufacturers (OEMs) [vehicle manufacturers], 50% from the aftermarket and 50% of overall business from batteries.”

During the reporting period the group increased its shareholding in Mutlu from 75% to 96.7%, and in July Metair initiated a minority squeeze-out to increase its shareholding to 100%, and delist the company from the Istanbul stock exchange.

Metair was looking forward to even better results from Mutlu in the next six months, as the company traditionally delivered a stronger second-half, said Loock.

Around two-thirds of its volumes was sold during the second half of the year, with the onset of colder weather.

Metair would set up a battery research and development centre in Turkey, close to Mutlu’s main European markets, added Loock.

“Centralising our technology base in Turkey should enable the group to meet the ever-increasing focus on the affordability of this technology. Mutlu is currently supplying three OEM customers with start/stop batteries and we have received further enquiries that could benefit from the integration, cost savings and synergy extraction we will achieve through this acquisition.”

Mutlu was currently competitive on a regional level, but not yet on an international level, in supplying on global contracts and into German head offices, he noted.

AFRICAN AUTO POLICIES TAKE THEIR TOLL
The contribution from Metair’s OEM businesses was disappointing owing to a number of factors, such as labour action, which contributed to the decline in production volumes during the first half of 2014, said Loock.

However, the introduction of higher import duties in some African economies also reduced vehicle exports from South Africa to these markets.

Countries such as Nigeria, Algeria and Morocco were protecting their local assembly operations through higher import duties, with some South African manufacturers seeing a 10% to 15% drop in export volumes as a result of this policy change, said Loock.

This translated into diminished demand for Metair’s products by these OEMs.

Aftermarket demand for Metair’s products varied across global regions and export markets during the period under review, with demand in South Africa remaining strong, while Turkey and Romania were softer after an abnormally warm winter.

Metair now exported its products to 46 countries.

Loock said on Monday that the International Trade Administration Commission of South Africa was investigating the possibility of levying an antidumping duty on batteries imported into the domestic market from South Korea.

He believed the extensive export grants provided to the Korean battery manufacturing industry, valued at roughly R7-billion over three years, were anticompetitive.

Edited by Creamer Media Reporter

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