Metair expects strong growth in vehicle production

METAIR, the JSE-listed leading international manufacturer, distributor and retailer of energy storage solutions and automotive components, anticipates a 100 000 to 150 000 units a year increase in vehicle production by original equipment manufacturers (OEMs) in South Africa in the medium term.

Theo Loock, the chief executive of Metair, said yesterday that, based on studies it had done on potential customers, they estimated an about 100 000 to 150 000 unit a year uplift in production from the current about 600 000 units a year over the medium term.

Loock said this translated into a 16 to 20 percent increase in production, with this additional vehicle production for export markets.

Sjoerd Douwenga, the chief financial officer of Metair, added that the OEMs based in South Africa had invested more than R25 billion in their operations in the country within the past three to four years and the production plans of these OEMs were based on single-platform production exported into Europe and other export markets.

Douwenga said this excluded potential exports by Isuzu Motors South Africa. Isuzu Motors acquired the General Motors South Africa plant in Struandale in Port Elizabeth when GM disinvested from South Africa last year.

Douwenga said Metair believed Isuzu Motors would have to become an exporter to have a meaningful balance between its production for the local market and African and international exports.

“That could even lift that 700 000 (unit annual production) even more, but to date they have not announced their plans,” he said.

Metair yesterday reported a strong recovery in its automotive component vertical, which it attributed to the ramp-up in production and stability returning following the 2016 new model launch for a key customer in South Africa.

This translated into stronger group results in the year to December, with Metair reporting a 22.6 percent growth in headline earnings a share to 281 cents from 229c in the previous year.

Group revenue increased 6.3 percent to R9.5bn from R8.9bn. Operating profit rose almost 16 percent to R847.5 million from R731.4m, with the operating margin improving to 8.9 percent.

A final dividend a share of 80c was declared.

The automotive sector increased turnover by 5.2 percent to R4.4bn and contributed 41 percent to group revenue and 42 percent to group operating profit.

Its profit before interest and tax margins improved to 10 percent from 6 percent.

Douwenga said the Hesto wire harness business recovered strongly to post a R112m improvement in its financial performance from a loss of R12m in the previous year to a profit of R99m, which was a big driver of the four percentage point margin improvement.

Loock said the group performed very well in a dynamic environment marked by major technological shifts in the mobility market.

Shares in Metair dropped 5.67 percent on the JSE yesterday to close at R22.45.