Decline in forklift sales a worrying economic signal, Eqstra CEO warns

21st March 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Eqstra Holdings earlier this month reported a 14.7% jump in revenue to R4.94-billion for the six months ended December 31, compared with the same period in 2012.

Operating profit, however, declined 13.5% to R461-million.

Eqstra CEO Walter Hill said last year’s three-week nationwide construction and civil engineering sector strike negatively impacted on earnings at its Contract Mining & Plant Rental division.

Hill said South Africa had to deal with the social issues underlying increasing labour action in the country. He believed much of the current unhappiness came from a lost generation that grew up during the turbulent 1970s, missing out on crucial educational opportunities.

While they earned salaries that were “materially not bad”, their incomes were more suitable for entry-level jobs, and not those of 45-year-olds to 55-year-olds wishing to educate their children.

“They are not going anywhere, because they can’t go anywhere. How do we reinvent this?”

Hill said it was becoming increasingly clear that striking workers were being joined in the picket lines by their sons, daughters and even grandchildren.

He also had some bad news for the local retail and manufacturing sectors, noting that South African forklift sales continued to decline sharply.

He regarded sales in this sector as an important economic indicator, as “forklifts move things to be manufactured, things already manufactured and things to be consumed”.

South African total forklift sales declined 25% in the period under review, compared with the same period in 2012, while January 2014 sales were down 55% on January 2013 sales.

“I am not an alarmist, but this is a reality.”

Hill said Eqstra had moved to reduce its reliance on the South African forklift business, with its overhead costs also aligned to a declining market.

Eqstra managed Toyota forklifts in South Africa.

Total interest-bearing borrow- ings at Eqstra increased by 5.2% in the period under review to R7.99-billion, up from R7.6-billion.

“We are well in control in this area,” said Hill.

Eqstra earned 46% of its revenue in the six months ended December 31 from the Contract Mining & Plant Rental division, but only 11% of its profit after tax.

Hill wanted to move to a business where the revenue was shared equally among the three divisions, spreading risk more evenly in the group.

The Industrial Equipment division grew operating profit for the period to R145-million, up from R109-million.

Eqstra’s Fleet Management & Logistics business unit saw oper- ating profit inch up from R172-million to R183-million.

The Contract Mining & Plant Rental division’s turnaround made a U-turn as operating profit for the six months ended December 31 plummeted to R130-million, down from R246-million for the same period in 2012.

Eqstra said the division’s turnaround was negatively impacted on by a R135-million loss in earnings, owing to industrial action.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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