Dominic Sewela
Barloworld is mulling the acquisition of another distribution deal with US equipment manufacturer Caterpillar, says Barloworld CEO Dominic Sewela.
This follows the sale of the Iberia Equipment business in Spain for R2.5-billion.
“We’ll pursue opportunities that fit the group’s capabilities,” noted Sewela in Johannesburg on Monday as he announced the company’s results for the year ended September 30.
Barloworld reported a 2% increase in revenue compared with the previous financial year, to R63.4-billion. Operating profit grew by 8%, to R4.4-billion.
The big stars in the past financial year were the Equipment Russia and Logistics businesses, with the latter managing a successful turnaround following the threat of a possible sell-off from Barloworld should it not improve its numbers.
Equipment Southern Africa delivered R1.79-billion in operating profit, up from R1.78-billion in the 2017 financial year. Equipment Russia increased operating profit from R582-million to R804-million, the Automotive business saw operating profit decline from R1.74-billion to R1.7-billion, with Logistics increasing operating profit from R101-million to R262-million.
Equipment Southern Africa CEO Emmy Leeka said that an increase in mining activity had seen an increase in lead times from Caterpillar, leading to a delay in deliveries.
He believed that the South African government’s “renewed commitment to infrastructure” would assist the sale of construction machines in the local market.
The development of the South African Mining Charter should also improve investor sentiment.
Equipment Southern Africa’s order book stood at R2.4-billion at financial year-end, up from R1.5-billion in the previous year, with the construction sector making up 42% of the order book.
Equipment Russia’s order book stood at $44-million at year-end, down from $64-million in the previous year.
Equipment Russia would probably not see a repeat of its 2018 record results in the 2019 financial year, but “it should still be solid”, noted CEO Quinton McGeer.
1 000 Jobs Lost
Barloworld Automotive had been forced to reduce its headcount by around 1 000 people over an 18-month period, said CEO Keith Rankin.
The business closed four dealerships in a stagnant new-vehicle market, of which three were General Motors (GM) facilities.
GM pulled out of South Africa in 2017.
The Automotive business also closed BMW Randburg and sold BMW Cape Town.
While the total dealer market in South Africa was up 0.5% in the 2018 financial year, the Barloworld Automotive business saw a 4.9% decline in new-unit sales, impacted largely by declining premium segment sales.
“Twenty per cent of our vehicle sales are in premium brands,” said Rankin.
Sewela expected the automotive business to continue facing challenges in 2019, as consumer confidence was low ahead of the elections and SA Inc was “not doing well”.
Empowerment Deal
On November 15 the Barloworld board approved a proposed R3.5-billion broad-based black economic empowerment transaction to be known as Khula Sizwe, which should create “sustainable black ownership” of around 48%, noted the company.
This proposed transaction seeks to have participation from the group’s employees (all races and gender), management and the general black public in South Africa.
The transaction is subject to approval by shareholders.