Manufacturer, distributor and retailer of energy storage solutions and automotive components, Metair, has secured a multiyear supply agreement, from 2018 onwards, for the supply of enhanced flooded start/stop batteries to German car maker Daimler, in Europe, says MD Theo Loock.

Speaking in Johannesburg at the company’s results for the year ended December 31, he said the JSE-listed group had also started production of its first lithium-ion automotive and industrial products.

Loock said the fast-growing trends of vehicle connectivity, autonomous driving, shared car use and electric cars were all placing increasing “electrical demand on vehicles”.

Industrial product development includes providing batteries for use in conjunction with solar panels, or systems similar to Tesla’s Powerwall.

Another highlight in Metair’s financial year was the acquisition of a 25% shareholding in Associated Battery Manufacturers Limited Kenya, East Africa’s largest battery and solar power manufacturer.

Loock said Metair's plans for 2016 had anticipated a “particularly challenging year”, owing to new vehicle model launches and the settling down of overseas acquisitions, for example.

However, a number of unexpected events added to this list of challenges, most notably political events in Turkey and the subsequent devaluation of the Turkish lira at the end of the year.

Metair reported a 16% increase in revenue for the year ended December 31, compared with 2015, to R8.95-billion.

However, group operating profit declined by 7%, to R731-million, owing mainly to costs and production inefficiencies associated with new model launches within Toyota, as well as operation-specific challenges experienced at Hesto and First National Battery (FNB).

Headline earnings a share declined by 8%, to 229c a share.
 
“In the context of an increasingly complex and fast evolving environment, we have produced a credible set of results,” said Loock.

“We expected a challenging year and put plans in place to address the challenges that were within our control.”

Loock said Mutlu Akü, in Turkey, and Rombat, in Romania, delivered “a pleasing performance, having achieved record [battery] production output following excellent last quarter demand”.

This countered the impact of lower margins in the South African energy storage operations, which suffered from intensified competition and some inefficiencies.

The Metair energy storage business grew its revenue by 19%, and now accounts for 59% of group revenue and 69% of operating profit.

Battery production increased 9%, to 7.8-million units.

Loock said Metair wanted to increase this to 15-million batteries a year in the next two or three years, after which the group might seek an “international merger between equals”.
 
Metair’s automotive component business achieved double-digit turnover growth.

This business unit’s revenue increased 14% to R4.14-billion, and now accounts for 41% of group revenue and 31% of operating profit.

This performance was supported by technology advancement, a weaker rand, as well as product and customer expansion.
 
Looking ahead, Loock said there had been a shift in the automotive component business to a lower production ceiling in 2017, with this business expected to pose “significantly increased complexity and variability”.

Production volume in the automotive components business decreased by 2.3% in 2016.
 
Loock cited the sociopolitical climate and failed military coup in Turkey, as well as related risks on lira volatility, as particular challenges for Metair in 2017. 

While the devaluation of the lira increased product competitiveness in the local and export markets, a weaker lira could reduce Mutlu Akü’s contribution to group earnings when converted into rand.
 
“T[his] year will see us focus intently on strengthening our adaptability and flexibility to meet our customers’ requirements without compromising on financial sustainability. We will also focus on marketing efforts to address competition in the local energy storage business and drive higher profitability at FNB,” said Loock.
 
“The successful execution of our strategy, efficiency improvements, possible ⎯ and needed ⎯ stabilisation of geopolitical conditions and exchange rates, as well as a peaceful labour environment are required for an improved financial performance in 2017.”