A struggling automotive components business saw operating profit at JSE-listed Metair drop 25%, to R260-million, for the six months ended June 30, compared with the same period last year.

Revenue at the energy storage solutions and automotive components manufacturer and distributor increased 14% in the half-year, to R4-billion.

Metair FD Sjoerd Douwenga said on Thursday that the automotive components business underwent its most disruptive phase since the 2009 financial crisis, courtesy of the launch of new vehicle models by this business’s major customer, Toyota South Africa Motors.

The Toyota plant, based in Durban, launched the new Fortuner and Hilux models – built on the same platform – this year.

Metair’s automotive components business reported an 88% drop in operating profit, to R23-million.

Douwenga said component production volumes were well below capacity during the initial launch phase. However this was followed by a period of production in excess of capacity, resulting in significant overtime.

Hesto Harnesses struggled in particular, with harnesses imported from Thailand, with this operation having to be fine-tuned to deliver on the expected volume and model-mix.

Metair MD Theo Loock was, however, pleased that the business had managed to renew all of its targeted component business with Toyota.

He was equally pleased that Metair’s energy storage business had secured a five-year supply contract to German manufacturer Daimler for the supply of start-stop batteries to its Africa, Middle East and Europe production sites.

“This is a significant contract to supply them on an international basis.”

He did not want to disclose the number of batteries Metair would supply to Daimler.

Metair’s energy storage business, which includes battery manufacturing operations in Turkey and Romania, saw operating profit for the six-month period increase by 9%, to R234-million, despite an attempted coup in Turkey.

Loock said none of Metair’s employees, nor its business had directly been negatively affected by the failed coup. However, the long-term effect remained unknown.

The Turkish government had “showed great sensitivity” thus far, noted Loock, opening a direct communication channel to Metair.

He said the attempted coup might also bring some stability to a country which had seen four elections in the past 18 months. However, a negative was that new vehicle sales might stagnate this year, rather than pick up by 10% to 12% as forecast initially.

An improved relationship between Russia and Turkey has also seen Metair’s Turkish operation resume exports to Russia.

Looking ahead, Loock said Metair had completed the restructuring into two business ‘verticals’, namely automotive components and energy storage.

The challenge for the automotive components business, in particular, relates to lower production volumes and margins for the next five to seven years.

Its performance may also be affected by labour instability as the South African automotive industry is currently locked in wage talks.

Loock said the relative calm with which labour disputes were settled recently in South Africa, as well as the level of wage increases they were settled at, seemed to reflect the country’s current economic reality.

He said a short strike of one to two weeks would be acceptable, “but anything longer would be difficult”.