Acquisition boosts Metair revenue

METAIR says its acquisition of a Turkish vehicle and industrial battery company significantly bolstered group revenue for the half-year. Revenue rose 32% from a year earlier.

METAIR, a manufacturer and distributor of mainly automotive products, saw its Mutlu Akü vehicle and industrial battery company acquisition in Turkey significantly bolster group revenue for the half-year ended June.

Revenue soared 32% in the interim period from the same period last year. Operating profit was up 16% to R319m, and cash generated from operations shot up 48% to R335m.

Metair bought Mutlu Group last December for R2.9bn. The main Mutlu Akü unit is a leading lead-acid battery maker and distributor in Turkey and the Middle East. The JSE-listed group — an original equipment manufacturer (OEM) that sells to vehicle manufacturers, as well as to the replacement and aftermarket segments — said yesterday its latest results included the Mutlu Group contribution for a full interim period for the first time. It added R880m to overall revenues.

An automotive OEM allows vehicle makers to buy OEM components and spare parts rather than produce these themselves. The term aftermarket is often used for non-OEM spare parts.

Metair MD Theo Loock said yesterday all the jump in Metair revenue came from Mutlu Akü. Lower hard currency debt levels, strict cost management and a drive to leverage group synergies had seen Mutlu Akü turnover rise 500% in the period.

“The integration of Mutlu Akü is progressing according to plan and remains a key pillar of Metair’s strategy to derive 50% of business from OEMs and 50% from the aftermarket — and 50% of overall business from batteries,” Mr Loock said.

But Metair also said its interim result was “distorted” as Mutlu Akü traditionally earned the bulk of its earnings in the second half of the year in the European winter.

This meant that despite Mutlu Akü’s “outstanding” first half, the dilutionary effect of an additional 46.4-million shares issued to acquire Mutlu Group, along with acquired debt of R1.35bn, resulted in Metair headline earnings per share for the period falling 16% from the same period last year.

In addition, the performance of the OEM segment was “disappointing” as continued labour disruption had “destabilised” SA’s manufacturing environment.

Meanwhile, internationally a failure by manufacturers to meet new carbon emission standards due in 2016 led to a decline in vehicle output, and higher import duties in parts of Africa slightly reduced vehicle exports.

“The market’s sell-down of Metair Investments today on the release of its (first-half) results is a function of the 16% cut in earnings as Metair copes with 30% higher shares in issue and a large debt pile after the successful acquisition of a ‘game-changing’ offshore acquisition; that of Turkish battery manufacturer Mutlu,” said Anthony Clark, small and medium company analyst at Vunani Securities, yesterday.

“It’s clear that the market has yet to grasp the full ramifications of the deal and its benefits and instead is focusing on the localised industrial action,” he said.

“If you look at the ‘bigger pic- ture’ Metair has diversified much of its risk away from SA but has kept much of its localised benefits via the Automotive Production and Development Programme.

“Metair is now a rand-hedge stock with access to new growth markets and ... conservative, disciplined management.”

The group is exporting to about 46 countries, and says demand remains strong in major export markets such as the Middle East, Africa and Russia.

Its nonautomotive business includes products for telecommunications, utilities, mining, retail and materials handling.

In August 2012 the group bought a 99% stake in Rombat, the largest lead-acid battery manufacturer in Romania. The R440m purchase gave it its initial complementary technology platforms and access to Europe’s vehicle markets.

Rombat and Mutlu Akü sell products to aftermarket customers in Romania, Turkey, Europe and the Middle East, as well as to OEMs in Romania, Turkey and Russia.

Metair has since introduced “start-stop” battery technology to the acquisitions.

This allows vehicles to switch off instead of idle when stopped, in line with mainstream European pollution laws.

During the period the group increased its shareholding in Mutlu Akü from 75% to 96.7%.