Eqstra CEO Walter Hill
Photo by: Duane Daws
Industrial and capital equipment group Eqstra on Wednesday reported an 11.6% increase in revenue, to R9-billion, for the year ended June 30, with operating profit up 16.2% to R1-billion.
The revenue jump came from increased equipment sales and the positive impact of new acquisitions in the Industrial Equipment business, as well as improved domestic contract mining production volumes in the Contract Mining and Plant Rental business.
The Fleet Management and Logistics division, however, did not produce the same positive result.
“Eqstra continued to deliver a robust financial performance amidst another period of tough market conditions, global commodity weakening and domestic economic uncertainty,” said Eqstra CEO Walter Hill.
“Our strategy of providing long-term leasing of mobile assets and the related value-added services to clients’ operations continued to prove its resilience.
“All divisions maintained strong order books, totalling R19-billion, with good prospects for increased client penetration from higher-margin value-added product sales, which will continue to underpin growth.”
Hill said Eqstra had ensured that its revenue streams remained sustainable.
The Industrial Equipment, and Fleet Management and Logistics divisions increased their revenue-generating asset fleets by 26.4% and 8.1% respectively and, while this investment had a short-term negative impact on profitability, Hill said it should result in long-term annuity revenue and earnings.
“Our success in turning around the Contract Mining and Plant Rental business will mean improved ongoing results,” he added.
Hill said Eqstra had spent the past year diversifying the group further, adding that it would continue with these initiatives to further improve its resilience to global and domestic economic volatility.
“The execution of our business plan and reaching strategic targets this year point to a continued improvement in 2014.
“Although the domestic economy will remain under pressure, demand from our corporate client base should remain resilient,” noted Hill. “We expect our group earnings performance to continue into the next financial year, although we remain cautious on the impact of the current wave of industrial action.”
The Eqstra board declared a dividend of 36c a share.
Divisional Overview
Hill believed the Industrial Equipment division remained well positioned to grow its market share through its domestic Toyota forklift franchise.
In the heavy equipment business unit, further growth was expected from recent acquisitions, particularly equipment supplier 600SA.
The Industrial Equipment business produced 29% of group revenue for the year ended June 30, delivering a 22.3% increase in operating profit, to R258-million.
Fleet Management and Logistics had a challenging year and should deliver a much-improved performance going forward, noted Hill, following the curtailment of noncore and loss-making activities.
Leasing asset growth in recent years should also add to future earnings.
This Fleet Management and Logistics division generated 25% of Eqstra revenue for the year ended June 30, but saw operating profit dip 12.4% to R311-million.
The drop in profit was owing to losses incurred in noncore activities and the related once-off closure costs of these activities. Logistics operations had also been rationalised.
The Contract Mining and Plant Rental business should continue to build on an improved operating performance compared with recent years.
“This, together with the renewal of key contracts during the year and increased volumes from clients, results in a positive outlook,” said Hill.
This division, which included contract miner MCC, generated 46% of group revenue.
Revenue in this division increased 13.9%, with operating profit up 46.9%, to R437-million.