Barloworld is, from a financial perspective, not too concerned about the current labour unrest simmering at a number of South African mines, says CEO Clive Thomson.

Barloworld distributes the Caterpillar brand, popular in the mining and construction industries in South Africa.
One of the reasons Thomson is not overly perturbed by the current ripple of strikes is that Barloworld earns 40% of its revenue outside South Africa. In addition, the labour action appears to be centred primarily on the underground gold and platinum sectors, with the JSE-listed distributor largely exposed to the traditionally opencast coal and iron-ore mines in South Africa.

Barloworld earlier this month reported an 11% increase in revenue to R31.3-billion for the six months ended March 31, compared with the same period last year. Operating profit jumped 14% to R1.46-billion, with net profit up 48% to R692-million.

The equipment division earned the group R13.67-billion of its revenue for the six-month period. Southern Africa was the biggest market at R9-billion in revenue, up 20% on the first half of the 2012 financial year. This division also earned the group R806-million of its operating profit. Southern Africa comprised R654-million of this number –a drop of 5%.

Thomson says the increase in revenue from equipment: Southern Africa is due to the extended mining product range Barloworld can now offer the market, following last year’s acquisition of the distribution businesses of Bucyrus Africa and Eqstra Mining Services.

However, the drop in profit can be attributed to rand weakness impacting on the cost of sales, lower margins from the new businesses brought into the Barloworld fold, and costs associated with the increased capacity of the group.

Thomson says Barloworld will work to increase margins “over time”.

He also notes that equipment: Southern Africa secured a number of deals in the six months under review, such as a R1.3-billion contract to supply Swakop Uranium’s Husab project, in Namibia, with hydraulic face shovels, electric rope shovels and rotary blasthole drill rigs. Six of Caterpillar’s first electric drive trucks in Africa are also being tested in a two-year, R300-million trial at Kumba Iron Ore’s Sishen mine.

The South African construction sector is seeing “a small uptick in provincial and munici- pal projects”, adds Thomson, but not so much at national level.

Despite these movements, however, Thomson notes that Barloworld’s Southern African order book was at R5.2-billion at March 31, down from R5.3-billion at the end of September.

He believes the regional equipment market will continue to be impacted on by the slowdown in global mining capital expenditure and softening commodity prices over the next six months.

Barloworld equipment: Iberia dramatically reduced its losses in the six months under review from R115-million to R5-million, with equipment: Russia increasing profit 9% to R157-million.

In order to maintain the technical expertise that resides within its Iberia business, Barloworld seconded 108 of this division’s technical staff to countries such as Angola, Malawi, Mozambique and South Africa, says Thomson.

The Iberian equipment market is likely to contract further, he adds.

Barloworld’s handling division earned the group R1.33-billion in revenue and R36-million in operating profit, with the automotive and logistics business recording R16.3-billion in revenue and R637-million in profit for the six months under review, up 27% on the comparable six months.

Thomson describes the performance of the automotive division as the highlight of the group’s half-year results.

The motor retail market will see an improved performance in Southern Africa over the next six months, says Thomson, with Barloworld looking ahead to continued growth in the fleet services and logistics markets. The car rental market should see volume growth, but rates will remain flat in a competitive environment.