Metair preparing for change

• Analyst cites Turkish business as results come in better than expected

Metair says it “performed very well in 2017 in a dynamic and challenging environment”, at a time when vehicle technologies are shifting away from fossil fuels.

Metair says it “performed very well in 2017 in a dynamic and challenging environment”, at a time vehicle technologies are shifting away from fossil fuels.

The battery and automotive components maker is making adjustments and preparations to accommodate these shifts in the industry, including for product marketing.

Revenue rose 6.3% to R9.5bn in the year ended December 2017. Earnings before interest, tax, depreciation and amortisation leapt 17.6% to R1.2bn, as headline earnings per share shot up 22.6% to 281c.

The batteries businesses in Turkey and Romania grew revenue by 31% in local currencies, but this was reduced to 21.1% in bottom-line rand terms due to a generally stronger South African currency.

Operating profit grew 15.9% as the overall margin grew to 8.9% from 8.2% in 2016.

“The result was better than we expected,” Mpho Mokotso, industrials analyst at Avior Capital Markets, said on Thursday.

She said this appeared to be due to the performance of Mutlu Aku, a Turkish lead-acid battery maker that Metair had bought in 2013 for R2.17bn.

Mokotso said Mutlu contributed about 32% to group revenue and 37% to group profit before interest and tax, respectively. She also said Metair’s automotive components segment had produced a “resilient performance”, with the profit before interest and tax margin also expanding.

Mokotso also said that despite a stronger rand diluting the bottom-line result in rand terms, this had made imports of lead — a key battery input — relatively cheaper for the group’s main South African operations. These provided about half of revenues and profits.

She said that the challenge for Metair going forward was to adapt to new technologies and the strategic relationships with suppliers and customers.

In 2012, Metair bought Rombat, the largest lead-acid battery maker in Romania. This company produced about 15% of group revenues and 10% to 12% of operating profit, Metair chief financial officer Sjoerd Douwenga said on Thursday.

“SA pretty much makes up the balance,” he said.

These transactions gave the company markets in eastern Europe, Russia, the Middle East and in many parts of Africa.

“We are very pleased with the result,” Metair MD Theo Loock said on Thursday.

He said there had been three main areas of improvement in operations in the period. These came in South African automotive component manufacturing; SA’s vehicle battery aftermarket and in Mutlu’s outperformance in the year.

Loock said that the group had invested about R100m in upgrading its First National Battery lines in SA and that a stronger rand had provided relief for lead imports.

Metair’s battery business makes up 59% of group revenue and 58% of operating profit, respectively.

The group produces batteries for the automotive, telecoms, utility, mining, retail and materials handling sectors.

Automotive components make up 41% of group revenue and 42% of operating profit.

Despite the good news, the company’s share price had fallen 5.21% near the close.