Metair ropes in specialists to rein in R4.8bn debt pile

Battery and vehicle component maker Metair has deployed the help of specialist debt advisers to help it deal with its R4.8bn debt pile as well as to turn around its Hesto Harnesses business and stabilise Mutlu Akü.

Group head Paul O’Flaherty — the company’s third CEO in the space of a year — said the focus in the short to medium term would be on bringing the Hesto debt down to reasonable levels while fixing the Turkish operations as well.

“We’ve appointed advisers to look at options around the Turkish business and how we potentially remove that debt, either through a sale of that business or sales of assets within that business,” O’Flaherty said on Wednesday.

“For the rest of the debt, the SA debt, including Hesto, we’ve also appointed debt advisers to look at how we restructure that debt. It’s too early to say what the outcome of this exercise is as we only started it 10 days ago, but we are confident we can present something in front of the board in May,” he said.

Accounting for about R1.8bn of the total group debt, the Hesto Harness business in KwaZulu-Natal has faced design and engineering challenges because of changes required in connection with the Ford Ranger. It incurred operating losses of R711m in the first half of 2023 due to this complexity, which required higher-than-expected upfront costs, labour and line capacity, as well as inventory.

Hesto has since seen some recovery and implemented intensive corrections to enhance efficiencies and reduce costs. This slight recovery was reflected last week when the automotive components manufacturer and battery maker reported headline earnings per share of 135c for the year ended December after a loss of 17c the year before.

Mutlu Akü, which falls under the energy storage vertical, has been bedevilled by the difficult macroeconomic and geopolitical context in which it operates, including hyperinflation in Turkey.

In 2023, Mutlu Akü faced several additional challenges, including a shortage of contract workers and the loss of material export volumes, resulting in a drop in profitability, high debt levels and increased working capital.

The CEO said Metair, alongside the advisers, was assessing ways to derisk Mutlu Akü while putting in the necessary resources to support management in addressing the issues.

Vertical restructurings are happening simultaneously with a strengthening of the Metair head office to give executives more strategic control.

He said one of the challenges that Metair had faced in the past was that it was more of an investment holding company, so it had a small head office structure. However, with the increasing complexity of the business, this had changed. 

“We have had to make sure that from the head office we are now in strategic control; we are not just on an oversight role,” said O’Flaherty. “We’ve moved into a scenario in the history of Metair where from a group level we are in more strategic control position,” he said adding that this entailed “closer interactions with the business, clearer KPIs and everyone takes accountability for what they need to do”.

After former CEOs Sjoerd Douwenga and Riaz Haffejee resigned in quick succession in 2023, O’Flaherty — a turnaround specialist with extensive experience in infrastructure, manufacturing, energy and banking industries — was appointed in January on a three-year contract to stabilise and reset the foundations of the business.

He said as the group continued in its bid to stabilise, it had also been addressing the leadership challenges through several appointments.

Wolfgang Ropertz, MD of Lumotech who has been in the group for 36 years, was moved up to an executive of Metair with responsibility to oversee Hesto, Lumotech and Unitrade. Johan Mouton, with more than four decades in automotive manufacturing and logistics, was brought in as COO to oversee the other subsidiaries.

Additionally, Metair is in the process of appointing a group HR executive to strengthen the head office’s human capital capacity.

Meanwhile, the executive is starting the process of finalising a new strategy for the group to ensure a turnaround and long-term success.

O’Flaherty said after presenting the debt plan to the board in about May, the focus would shift towards creating a new group growth strategy to unlock value.

“What I have said to the board is that you can’t keep looking in your rear-view mirror like this,” he said. After May, “we will be looking at that strategy, what is that [growth] strategy? What are the opportunities in the auto component business in SA, and the opportunities in energy storage in Africa, what are all our opportunities? But that is something we will start once we get through this hurdle.”

Metair shares ended 1.27% weaker at R12.39 on Wednesday.

gumedemi@businesslive.co.za