Barloworld eyes mining upswing from 2016
Barloworld, Africa’s largest seller of Caterpillar equipment, forecast an upswing in the miningequipment market from 2016 as it managed to contain costs amid a lacklustre revenue performance.
“Sales to the mining companies have actually dropped off in both 2013 and 2014 and we expect a further drop-off into 2015,” said Clive Thomson, CEO of Barloworld. “We think there will be three years of contraction in new sales to the mining industry. At this stage we are forecasting the beginning of the recovery only in our 2016 financial year.”
EQUIPMENT SALES IN SOUTHERN AFRICA WERE DRIVEN BY AFTERMARKET SALES, AND THIS UNIT SAW REVENUE GROW BY 9.3% TO R20.9BN, THE SECOND-BIGGEST CHUNK OF BARLOWORLD’S OVERALL TURNOVER OF R62.1BN DURING THE FINANCIAL YEAR ENDING SEPTEMBER.
South Africa’s mining sector has been hit by labour disruptions, a decline in commodity prices a nd energ y constraints. Aftermarket revenue grew 17% over the period.
The company’s Russian equipment-sale division increased sales by 23% to $382.7m despite the sharp decline in the oil price and political tension with Ukraine, and sanctions imposed by the US and European Union.
In Spain, where a property boom before the recession of 2009 drove the economy, Barloworld cut more than R1bn of costs from its equipment division in a bid to set it up for expansion once the country’s economy starts to grow again. Revenue declined 21% to €290m in the year ending September.
Barloworld has f aced a t ough environment in Iberia for the last six or seven years and spent a lot of money restructuring the business, according to Thomson.
“It would be exactly the wrong time to look at exiting this business,” he said. “We’re very committed to this business. When the market recovers, we believe we will make good money again in Spain.”
The company’s automotive unit, the second-largest contributor to revenue, saw sales increase by 9.8% to R19.2bn even as South African consumers buckle under high inf lation, rising administrative prices and high household indebtedness. New vehicle sales at Barloworld’s dealerships declined 1.1% in the f inancial year, according to Thomson.
“That is a bit better than the overall market,” he said. “That’s perhaps because we’re more skewed towards the premium brands, which have been a bit more resilient. Mercedes-Benz had a very good year for us in 2014, with some interesting model introductions.”
The unit saw the sale of parts increase by 15% over the period, Thomson said. The company cut costs in its automotive division resulting in a 29% jump in operating profit to R542m. It bought a Toyota dealership in Kuruman, close to the booming mining town of Kathu in the Northern Cape, and a Jaguar/Land Rover dealership in Witbank.
Barloworld’s share price returned 5.4% over the past 12 months.
Barloworld is the official Caterpillar dealer in 11 African countries, Spain, Portugal and a significant portion of Russia.