Global supply chain disruptions, civil unrest take toll on Metair

27th October 2021

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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Metair warns that the second half of its 2021 financial year will continue to be dominated by the impact of Covid-19, as well as the “severe effect” of global supply-chain disruptions and the global shortage of semi-conductors.

Metair manufactures, assembles, distributes and retails energy storage products and automotive components in Africa, Europe, Turkey, the Middle East and Russia.

In a business update published this week, Metair notes that the third wave of Covid-19 infections and the ten days of civil unrest in South Africa in July all resulted in a difficult start to the second half of the financial year.

Metair says its automotive components vertical is currently supporting the local production of a number of new models and facelift launches.

As its subsidiaries are in pre-production and prototype manufacturing phases for these projects, the company will continue to incur project costs ahead of these model launches.

Also, raw-material shortages (including semi-conductor chips), supply-chain delays and loss of production owing to strike action within the steel and engineering sector, are all having an increasingly negative impact on original equipment manufacturer volumes. 

As a result, there is a degree of uncertainty around the short-term production volume outlook for the remainder of the year. (Volume expectations over the model life remain unchanged, however.)

Metair says a potential dip to below 90% of 2019 vehicle production volumes is possible in South Africa this year.

“Increased supply chain costs (both sea and airfreight), manufacturing volatility and volume declines, production disruptions due to the July civil unrest in South Africa and project costs related to the investment in future growth, could all result in profit before interest and tax margins contracting to between 5% and 7% for the full financial year.”

In the energy storage vertical, Metair continues to focus on expanding its automotive battery product range in line with shifting market trends. 

Energy costs in Europe and Turkey are, however, rising significantly and may result in operating margin pressure during the fourth quarter of the financial year, owing to the lag in price recovery of these input costs. 

“Market demand has remained resilient, in line with the recovery plan, and international demand for lead-acid batteries in all sales channels remains high,” says Metair.

First National Battery continues its strategic shift to a trade-focused model in its industrial manufacturing business to counter the effect of technology, market and demand shifts. 

Retention of customers will be the main focus in this business, with a shift to sourcing traded product that is more competitive with a wider range of technology. 

This will likely result in R30-million to R40-million in manufacturing closure costs in the second half of the financial year.

Metair notes that its overall capital investment programme has also been impacted by the global supply chain shortages and shipping delays. 

A portion of planned capital expenditure for 2021 is, therefore, anticipated to be delayed into 2022. 

Li-ion Strategy
Metair says it has reassessed its lithium-ion (li-ion) strategy and taken the decision to move its li-ion production line, currently located in Romania, to its Mutlu Akü subsidiary, in Turkey.

“This move aims to leverage off of Mutlu’s brand strength and operational expertise, as well as its access and positioning within a growing market for li-ion products, and will benefit from recently available incentives that will recover the initial investment. 

“The li-ion line will be located within Mutlu’s existing production facilities, and the move is anticipated to be finalised by the second quarter of 2022.”

Metair says its li-ion strategy will continue to be focused purely on 12 V applications for the automotive and industrial segments. 

“This approach ensures that Metair transitions to newer technologies without the need to invest in large-scale capital expansion programmes, which are typically required for high voltage/electric vehicle battery applications.”

 

Edited by Creamer Media Reporter

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