Mixed bag for industrial conglomerate Barloworld
The equipment division in southern African and Russia had a strong first half, as did the automotive operation, but Iberia was disappointing, and logistics profits fell
Pretax and net profit at industrial conglomerate Barloworld fell in the six months to end-March, and revenue ticked up 2%, in a period of mixed fortunes for its various operations.
Net profit dropped to R765m, down 5.9% from R813m a year earlier. Pretax profit fell 7.9% to R1.079bn. Revenue rose to R32.532bn from R31.947bn and operating profit was up 5.% at R1.849bn.
The effect of currency swings was a R366m loss on currency translations for the group, from a R567m gain a year earlier.
CEO Dominic Sewela said the automotive division produced a "record result" in a tough environment; the equipment division in Russia and southern Africa did well, but Iberia was "disappointing"; and the Bartrac joint venture in Democratic Republic of Congo was "well up" on a year ago.
"Logistics performance was below prior year due to the weakening trading conditions," Sewela said.
Barloworld has a longstanding partnership with earthmoving equipment group Caterpillar, which includes Caterpillar Global Mining in southern Africa and Russia, serving opencast and underground mining operations.
In southern Africa, revenue fell R1bn or 11% to R8.2bn on lower mining activity, especially outside SA, and a R185m currency exchange hit.
However, Barloworld said the division’s operating profit was up 1.2% and operating margin improved to 8.7% from 7.6%, as after-sales services made up a bigger proportion of revenue.
The Bartrac venture turned around to a R41m profit from a R27m loss before.
Revenue in Iberia (Spain and Portugal) fell 4.1% to €133m and operating profit plunged 57% to €591.
The improvement in Russia — revenue up 6% to $167.5m and operating profit up 24% to $19.4m — came despite a long recession in that country and a R232m currency exchange loss due to a stronger rand. In rand terms, operating profit was 12% higher.
Revenue rose 11% and operating profit was up 14%, driven by strong results in all the subdivisions.
The operating margin for car rentals narrowed slightly, to 9.1% from 9.3%, as operating profit rose 12% and revenue increased 14%.
The Avis Fleet operation grew revenue by 4.7% but operating profit was up 12%, though its fleet under management shrank as a result of a weaker new vehicle market. The division was boosted by an improvement in used-car profit.
Motor trading revenue was up 11% and operating profit grew 19%, despite a weaker market for new vehicles.
Revenue grew 21% to R3.2bn but operating profit fell 17% to R51m. Barloworld said this was due to tough trading conditions, and the costs of finalising the sale of its Supply Chain Software unit.
The company announced this sale in early November 2015 and said at the time it was expected to be completed by the end of that month.
The group’s cash holdings rose 40% to R3.23bn from R2.318bn a year earlier.
An interim dividend of 125c per share was declared, up from 115c a year earlier.
On near-term prospects, Sewela said: "The outlook for global economic growth remains positive and this is reflected in the increased demand for commodities and improved commodity prices.
"Some recovery in sub-Saharan Africa growth is expected, notwithstanding the downside risks
due to lower oil prices and possible further credit-rating downgrades for SA.
"A strategic review process has been completed outlining our focus on fixing and addressing underperforming businesses, optimising the existing portfolio and pursuing targeted high-growth opportunities."