Metair says battery volume recovery giving it a boost

Automotive group Metair, which has products ranging from batteries to air-conditioning systems, is optimistic about its outlook as vehicle demand slowly gears up from a Covid-19 hit.

The post-pandemic recovery in demand for aftermarket parts has been particularly strong, the group said in an update on Friday, with its outlook for battery sales better than expected, while export demand from Europe has also picked up, benefiting its components business.

Metair now only expects revenue to fall by between R561m and R1.1bn in its year to endDecember, a drop of between 5% and 10%. It previously warned of a fall of up to R1.7bn, or 15%.

Metair, valued at R3.45bn on the JSE on Friday, generates just more than half its revenue from batteries, with businesses including Mutlu Akü in Turkey, Rombat in Romania, and First National Battery in SA.

Metair has raised its battery sales guidance about 3% from the 7-million units it advised previously to 7.2-million, with the group saying while improved volumes recently reflected pent-up sales from the lockdown, there is genuinely strong demand in the market.

In automotive components, vehicle sales in SA remain depressed, but there has been strong export demand from Europe — with about 60% of the group’s components destined for offshore.

Metair still expects full-year revenues to be between 25% and 30% lower than in the prior year, or a fall of up to R1.7bn, though component production should be towards the upper end of previous guidance.

COVID-19 DELAYS

Metair said it remains optimistic about SA vehicle production, and is proceeding with an investment plan after securing contracts for new vehicle types, and vehicle facelifts. The latter refers to changes to a vehicle type that do not include a complete redesign. The group has secured contracts with a number of manufacturers, notably Ford. It has also secured contracts with Mercedes-Benz, as well as for new Nissan, Volkswagen and Isuzu models.

Metair has approved a R1.3bn investment to support new projects that could deliver between R25bn and R28bn of turnover over a seven-year period from the middle of 2022, depending on the final project volumes and product designs.

However, Covid-19 has resulted in a slight change in project timing, resulting in potentially prolonged project model life, the group said.

“Project timings have been under pressure due to travel restrictions and the finalisation of market positioning, and therefore some projects have been delayed by three to six months,” the group said.

“Project model lives have also been reassessed by Metair’s customers, and it appears there is potential for the secured projects to be extended from the initial five to seven years to seven to 10 years,” the update read.

In afternoon trade on Friday, Metair ’ s share was unchanged at R17.25, having fallen by just over a quarter so far in 2020.