Barloworld’s South African businesses continued to face a myriad of challenging trading conditions, says CEO Dominic Sewela.
Announcing the group’s financial results for the six months ended March 31, Sewela said on Monday that Barloworld’s domestic operations had had to contend with a constrained local macroeconomic environment, inflationary cost pressures, as well as relatively higher borrowing costs affecting both businesses and households.
He added that while the group had anticipated a slowdown in local mining activity, the effect of South Africa’s rail and port bottlenecks and the subsequent parking of large equipment by its major mining customers, had placed additional pressure on the performance of the South African equipment business in the first six months.
It was especially in the coal, platinum and iron-ore spaces where local mining operations were pausing production, with a softening in the global commodity cycle adding fuel to the fire.
This had then also dampened the appetite for new machine acquisitions.
Sewela said he did not expect the remainder of the year or early 2025 to deliver improved conditions for the domestic economy, with the next 18 months not expected to “be easy”. There was, however, some potential for improvement in the latter part of next year.
Sewela added that Barloword was sticking with Ingrain, with this newish acquisition, which had just concluded a restructuring process, still struggled to find its feet.
Ingrain is a producer of unmodified and modified starch, glucose and related products.
Sewela said Ingrain remained “a very good business in the long-term, very cash-generative”.
Barloworld on Monday reported an 8% drop in revenue for the six months under review, to R19.2-billion, compared with the same period in the previous financial year.
Operating profit form core trading activities was down 12%, to R1.85-billion.
The star performer for the period was the Mongolian equipment business.
Albeit a small part of Barloworld’s business, at 10% of revenue, it delivered 21% of operating profit, at R428-million – up 96%.
Equipment Southern Africa (61% of Barloworld’s business by revenue) saw a 14% dip in operating profit, Equipment VT (which includes the Russia business) a 17% decline, and Ingrain a 30% drop.
“While the businesses in South Africa faced a myriad of challenging trading conditions, the Mongolian business benefited from favourable tailwinds in the Mongolian economy during the first half of the 2024 financial year,” said Sewela.