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Hyperinflation, higher costs take big bite out of Metair’s profits

Image of Metair interim CEO Sjoerd Douwenga

Sjoerd Douwenga

30th March 2023

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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Metair faced a tough 2022 financial year, with its results significantly impacted by hyperinflation in Türkiye; project costs to support the launch of the new Ford Ranger; higher logistics costs; the knock-on effects of flooding at the Toyota plant; as well as increased interest charges owing to high net-debt levels.

These factors, combined with higher energy costs, “required active management to stabilise operations”, says the international manufacturer, distributor and retailer of energy storage solutions and automotive components.

The JSE-listed Metair saw group revenue for the financial year ended December 31 increase by 10%, to R13.91-billion, boosted by overall higher vehicle production, as well as strong export sales from Türkiye. 

Growth in battery unit prices and increased cost content in components also contributed to higher sales prices.

However, the group’s operating profit fell sharply from R1.16-billion to R453-million.

“These results are reflective of a number of extraordinary external impacts which occurred at a time when we are investing heavily for future growth,” says interim CEO Sjoerd Douwenga.

“Our teams did well to maintain supply to our customers and deliver on our strategic priorities, navigating global supply chain disruptions and raw material shortages, lost production due to the impact of the KwaZulu-Natal floods on our major customer [Toyota], inflationary cost pressures and higher energy costs. 

“Looking through the noise, particularly the non-cash impact of hyperinflation accounting for Mutlu [in Türkiye], our underlying business performance remains solid and our prospects are promising, with our strategic investments estimated to deliver R60-billion in revenue over the next decade,” says Douwenga.

The Automotive Components Vertical contributed R7.1-billion in revenue, a 5% increase on the prior year.

The vertical generated operating profit of R45-million, with margins impacted by manufacturing launch inefficiencies and learning curve costs, the payment of premium logistics costs and other once-off model launch project costs. 

The South African operations were significantly affected by the loss of production at Toyota. However, Metair’s business interruption insurance claim, capped at R500-million, was successfully finalised.

Production of the group’s major new model investment, the next-generation Ford Ranger, started mid-November, with peak levels expected to be reached from April onwards. 

The Energy Storage Vertical faced high inflation fuelled by unprecedented energy and labour cost increases across Türkiye and Romania. 

These costs impact margins in the short term, as they are yet to be recovered from customers. 

Revenue increased by 14.2% to R8.6-billion, mainly owing to improved volumes, the impact of hyperinflation and higher average lead prices. Operating profit was R195-million.

Metair’s total capital expenditure reached R1.16-billion, in order to facilitate increased capacity ahead of new model launches and vehicle facelifts. 

Net debt is at R2.6-billion. 

“We are closely managing the group’s financial position with a focus on effective cash management, specifically in the areas of working capital, cost control and capital expenditures, as we support our customers with their requirements and planned investments,” says interim CFO Anesh Jogia.

 

Edited by Creamer Media Reporter

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