Barloworld leaks revenue amid mining slowdown

A Molotov cocktail of lower sales and volumes, a slowdown in the mining sector and a reduction in demand in the consumer industries vertical resulted in a 5% drop in revenue for the first four months of the 2024 financial year, reports Barloworld.

In a statement on Thursday, the group said its Southern African equipment business was affected by lower machine sales revenue, in line with the expected slowdown in mining activity.

In the 2023 annual report, published in December, it said the market for mining equipment was expected to slow in 2024 due to the reduction in commodity demand and weakening commodity prices.

It said subsequently: “Investment in working capital is starting to decrease from the high levels in the 2023 financial year.”

However, this dip, which was also affected by continued geopolitical conflict, was countered a little by an uptick in aftersales activity, resulting in a marginal drop in the division’s revenue growth of 2% relative to the prior period.

Barloworld is the official Caterpillar dealer with operations in 16 countries.

Barloworld Eurasia experienced an upswing, bolstered by Mongolia’s revenue, which increased 20% due to continuing strong mining activity.

The company was upbeat, saying that the overall outlook was proving to be more supportive than expected.

The revenue of Ingrain, previously known as Tongaat Hulett Starch before Barloworld bought it in 2020, slipped 5% owing to reductions in sales and customer demand in the alcoholic beverages, papermaking and converting sectors.

Export sales were down due to competitive global pricing of starch, a situation further compounded by challenges in the Port of Durban, it said.

Operating margins of Ingrain were lower than in the prior period as a result of a drop in revenue with a rising fixed-cost base.

Barloworld, which has a market capitalisation of R14bn on the JSE, said the Ingrain business began a restructuring to realign its fixed expenses with lower trading activity. “This will position the business to achieve targeted returns in the near future,” said the company.

Its shares ended 0.85% down at R73.40 on Thursday, and are down nearly 20% over the past year.

THE COMPANY WAS UPBEAT, SAYING THAT THE OVERALL OUTLOOK WAS PROVING TO BE MORE SUPPORTIVE THAN EXPECTED