Car exports keep Metair upbeat
Components manufacturer shrugs off local challenges with 21% rise in headline earnings
In stark contrast to the gloomy outlook of other companies dependent on local economic conditions, automotive components manufacturer Metair Investments is upbeat about its prospects in the second half of its financial year.
In stark contrast to the gloomy outlook of other companies dependent on local economic conditions, automotive components manufacturer Metair Investments is upbeat about its prospects in the second half of its financial year.
The group, which has a market capitalisation of about R4.5bn, said it expects growth in production of local vehicles destined for export to support demand for parts, even as SA vehicle sales themselves continue their downward trend.
“One must understand the automotive industry model, launch decisions and model vehicle expansion are taken years in advance and you can’t just take the current macroeconomic situation into account,” group CEO Theo Loock said.
Loock said domestic annual vehicle production looked set to rise to 800,000 from the current 600,000 over the next two to three years, boding well for the battery maker, even though the local environment is generally subdued for manufacturers.
The energy storage vertical turnover increased 14% in the six months to end-June, adding 51% to group revenue. Its automotive component turnover, which contributed 49% of group revenue, rose 24%.
Metair noted that it has seen an increase in demand from this sector in its first half-year. It is building up a contingency stockpile because of a possible strike in the automotive sector later in 2019.
A multiyear wage agreement between the National Union of Metalworkers of SA and the Automobile Manufacturers Employers Organisation came to an end on June 30 and the parties remain deadlocked amid double-digit wage demands.
The sector saw a three-week strike that halted production lines during talks in 2013, though this was avoided in 2016.
Loock said the company is not expecting “abnormal” disruptions and the contingency planning only represents about a quarter of the growth in volumes seen in the first half.
The prospects for local automotive demand, at least in terms of the export market, remain good, Loock said, adding that this would also depend on how consumers react to forthcoming vehicle models.
SA’s manufacturers in general remain under strain, with the sector contracting 8.8% in the first quarter of 2019. The second quarter is expected to have shown a recovery, although economists have said overall conditions remain subdued.
The group said First National Battery increased automotive volumes 5%, thanks to cost and pricing improvements, as well as rebranding, which helped its product and retail positioning.
Exports in its Turkey business, Mutlu Akü, grew 85% in the six months despite the devaluation of the Turkish lira. It expressed concern about the country’s currency, which created a challenging trading environment for its business.
Its headline earnings per share rose 21% to 160c from 132c in the period a year earlier, while earnings before interest, taxation, depreciation and amortisation grew 19%.
Metair’s share price was barely changed on the day to close at R22.47.