Barloworld may exit its logistics business should it not reach certain milestones by September next year, says CEO Dominic Sewela.
Barloworld Logistics is currently the focus of a turnaround strategy under new divisional CEO Kamogelo Mmutlana, who took control of the business in March.
Revenue at the logistics business was up 7.2% for the financial year ended September 30 to R6.2-billion, compared with the previous 12-month period, with operating profit down 55% to R101-million.
Speaking at the Barloworld results function, held in Johannesburg, Mmutlana said the logistics business had reduced its debt levels in the period under review, while also generating positive cashflow. He said the focus had been on collapsing similar businesses into a single structure, thereby also slimming down a bloated management structure. A job freeze had also been in place, with job losses likely in the next few months.
“Growth is not the challenge – the cost base is,” said Mmutlana.
The restructuring of Barloworld Logistics forms part of a new Barloworld group strategy, approved in March.
It will take about 18 months to implement.
This strategy includes the sale of the Middle East logistics business, with Sewela expecting Barloworld to exit that business in the first quarter of next year.
The sale of the Iberia equipment business should be completed by the middle of next year, he added.
Healthy Equipment Order Book
Barloworld Equipment recorded 7% growth in operating profit to R2.36-billion, with the Automotive and Logistics business experiencing a 2% decline to R1.84-billion.
The automotive business had to close three General Motors dealerships as a result of the US carmaker’s exit from South Africa, announced this year.
The business also closed one and disposed of another BMW dealership.
These actions will reduce annualised revenue by close to R1.5-billion in 2018, with marginal impact at operating level.
Headcount in the motor trading division had been reduced by 620 people.
Barloworld Equipment CEO Peter Bulterman attributed the increase in operating profit at the group’s equipment business to “cost-containment measures”.
The business also benefited from recovering commodity prices.
“Mining opportunities are on the increase,” said Bulterman.
Equipment Southern Africa recorded an order book of R1.3-billion in the 2016 financial year, growing to R1.5-billion as at September 30 this year. The business has added another R1.4-billion in orders since September.
Equipment Russia’s order book jumped a massive 862% from 2016 to 2017, from $21-million to $202-million.
Bulterman said this was a new record for the business.
The bulk of the equipment on order was to be delivered in the current financial year.
Barloworld group revenue remained stable for the year at R62-billion, as did operating profit, at R4.1-billion.
Barloworld FD Don Wilson said the stronger rand in 2017 wiped R1.1-billion from the group’s revenue, and R83-million from operating profit.