Despite a weaker first quarter, the global economy remains on track to show solid growth for 2018 in both developed and emerging markets, while South Africa’s economic outlook is also improving, benefiting multinational Barloworld.
The company on Monday reported a 14.2% year-on-year increase in headline earnings a share from continuing operations of 457c for the six months ended March 31.
Headline earnings a share, including discontinued operations, improved by 32% year-on-year to of 481c.
Barloworld declared an interim dividend of 145c a share.
Barloworld generated an operating profit from continuing operations of R1.95-billion, a 6.1% year-on-year increase.
“The company produced a much improved result for the six months ended March 31 despite challenging trading conditions in some areas. We continue to drive focus on addressing underperformance across the business,” notes Barloworld CE Dominic Sewela.
In line with addressing its underperformance, Barloworld will sell its Equipment Iberia business, with the transaction expected to be concluded in July.
Meanwhile, Barloworld’s revenue for the reporting period grew by 1% to R30.9-billion, primarily on the back of improved performances in the Equipment Russia and Equipment Southern Africa divisions.
EQUIPMENT SOUTHERN AFRICA
Barloworld’s equipment division for Southern Africa delivered a good operating performance in the first half of the financial year, which was driven by positive global commodity price movements and an increase in mining activity.
Revenue of R8.67-billion was up by 5.6% year-on-year, driven by higher mining machine sales in South Africa, Mozambique and Zambia.
The company reported an operating profit of R734-million, which was 2.9% higher year-on-year, while the operating margin decreased to 8.5% as a result of the increase in mining machines in the sales mix and a stronger rand.
Income from associates and joint ventures (JVs) which mainly relates to Bartrac – Barloworld’s JV in the Katanga province of the Democratic Republic of Congo – increased by R72-million to R107-million, supported by increased mining activity in that region.
“Equipment Southern Africa’s firm orders as at March 31, of R2.9-billion, were in line with the September 2017 order book with about R2.2-billion relating to mining and contract mining machines,” commented Sewala.
Barloworld’s equipment division in Russia continued to benefit from greenfield and brownfield mining projects, as well as a recovery in commodity prices, particularly in the coal sector, and produced a record revenue and operating profit for the first six months of the financial year.
Revenue rose by 77% year-on-year to $296-million, supported by strong growth in both prime product and aftermarket sales.
The division’s operating profit increased by 26% year-on-year to $25-million, while the operating margin of 8.2% was below that of the prior year, owing to the increase of machines in the overall sales mix.
“The Russian firm order book as at the end of March, of $132.1-million, included mining orders of $100-million scheduled for delivery in the next six months.
“Total major projects currently under discussion stood at $187-million and we remain positive about achieving a strong second half,” said Sewala.
AUTOMOTIVE & LOGISTICS
Meanwhile, Barloworld’s automotive division produced solid results despite challenging market conditions. Revenue for the six month period was R15.4-billion, which is 5.8% below last year, as a result of the BMW and General Motors dealership closures and disposals during the course of last year.
Operating profit of R883-million was R20-million higher year-on-year, while the operating margin of 5.7% was well ahead of the 5.3% achieved in the prior comparable period.
The company’s car rental revenue increased by 4.2% year-on-year to R3.4-billion. The business managed to increase both billed days and average rate per day. Operating profit of R301-million showed a 1.3% year-on-year improvement.
In terms of fleet services, Barloworld reported R1.7-billion in revenue, which was 2.3% ahead of last year, while operating profit increased by 5.5% year-on-year to R308-million, mainly as a result of higher used vehicle sales.
Motor trading’s revenue for the period was R10.2-billion, which is a R1.1-billion decrease year-on-year, mainly as a result of the closures and disposals that Barloworld had last year. Both new and used vehicle sales were down on the prior year with all premium brands under pressure.
Operating profit to March 31, of R274-million, for motor trading was in line with that of last year, and operating margin improved from 2.4% to 2.7%.
In logistics, Barloworld reported revenues of R2.99-million, a 6.6% decrease compared with the prior comparable period. This is mainly owing to the combination of a subdued economy that is driving less than optimal activity levels within contracts, as well as a rationalised customer portfolio.
Revenue in the transport segment was 8.3% higher year-on-year.
Logistics’ operating profit of R99-million was significantly ahead of the R51-million generated in the first half of the prior year.
The operational and overhead cost savings initiatives in 2017 more than offset the R12.5-million restructure costs incurred in the period.
Sewela commented that Barloworld continues to evaluate high-return opportunities, aligned with its capability in emerging markets and steady progress is being made on reviewing potential growth areas – with active searches in both the local and targeted international markets.