Diversified group Barloworld is finally reaping the rewards of an extensive restructuring process.
Announcing its financial results for the year ended September 30, the group saw operating profit from continuing operations improve by 119% year-on-year to R4.3-billion.
Revenue from continuing operations was up 22.5%, to R41.6-billion, with this number inclusive of a combined contribution of R6.6-billion from the newly acquired Equipment Mongolia and Ingrain businesses.
Barloworld says the integration of these acquisitions into the group is progressing well and that they are delivering ahead of initial expectations.
The group also benefitted from the performance of the Southern African and Eurasia Equipment businesses, and the turnaround of the car rental business.
Equipment Southern Africa, still the biggest revenue and profit contributor to the group, delivered a record operating margin of 10.7%, despite overall trading activity being at 89.2% of pre-pandemic levels.
Operating profit for this business was R1.95-billion, up from R1.2-billion in the previous year.
The Equipment Eurasia business unit built on its strong start to the year, delivering a 17% jump in revenue performance in the second half of the financial year.
Operating profit increased to R1.2-billion for the financial year, up from R834-million.
Barloworld’s new Consumer Industries business, Ingrain, recorded operating profit of R534-million for the 11 months it was included in the Barloworld fold.
Recovery in sales volumes and improved margin realisation driven by higher international agriculture commodity prices benefitted the results.
The Car Rental and Leasing business saw positive results from unlocking synergies and value through the integration of the car rental and Avis fleet businesses.
Avis Budget’s repositioning strategy towards off-airport business yielded results, particularly in the growth of the subscription products, with longer length rentals and lower direct costs.
As part of its restructuring process, Barloworld exited its motor retail business during the period under review and the board approved a formal disposal process to exit the logistics business after receiving a number of expressions of interest.
The group is now negotiating the piecemeal disposal of various sections of the logistics business in response to high levels of interest in smaller business units.
In light of this approach, Barloworld has entered into sale agreements for its controlling interest in Aspen Logistics and the shares in subsidiaries which own Manline Energy, Manline Freight and Timber 24.
These two agreements cover the bulk of the assets within the Barloworld Transport business. The agreements remain subject to regulatory approval.
Barloworld CEO Dominic Sewela says Barloworld has pivoted its portfolio towards defensive, relatively asset-light and cash-generative industrial sectors, based on a business-to-business operating model.
“Notwithstanding the challenging environment, Barloworld delivered an impressive set of results,” he notes.
“I am pleased that the decisions we have made in the past have been value accretive to shareholders and have positioned us to remain agile in a changing operating environment.”
Looking ahead, the outlook for the year remains positive, with this sentiment driven by the performance of the Industrial Equipment and Services businesses.
Equipment Southern Africa’s order book remains strong, supported by a buoyant outlook for the mining sector.
The construction industry is also expected to recover as infrastructure and energy projects gather momentum.
Equipment Eurasia’s outlook for 2022 remains positive as the recovery in the coal market is expected to continue, and further benefits are expected from the integration of Mongolia into the Eurasia division.
For Ingrain, the outlook is good as maize prices are expected to trade closer to international prices, which will support margins going forward.
Barloworld also expects international starch and glucose prices to remain high, following increases on the back of Covid-19 supply chain constraints, increased freight rates and higher energy costs.