Barloworld’s sales more than halved in Russia, but rise overall

The sales of Barloworld more than halved in Russia in recent times as war raged on Ukraine, but that did not stop the diversified industrial group from reporting higher overall revenue.

The group, valued at R16.6bn on the JSE, said in a voluntary update for the five months to end-February that its revenue in Russia fell 53.4% year on year to $116.2m (R2.11bn) and operating profit from core operating activities were down 37%.

“The war in Ukraine continues to affect the business in Russia. Due to reduced product lines and a constrained supply chain, results were down from the prior period’s record results, but better than expected,” the company said.

“As demand for parts remains strong, we expect an improved cash generation position over the remainder of the 2023 financial year. The local Russian business continues to be self-sufficient in terms of its funding requirements,” it said.

But the overall picture looked better for the group, which generates most of its operating profit in Southern Africa.

Revenue improved 14.9% to R16.5bn and operating profit was up nearly a fifth at R1.5bn at a margin of 8.9%. The Johannesburg-based company supplies industrial gear such as earthmoving equipment and power systems to customers in the mining and construction sectors. Higher machine and part sales on the back of more activity in the mining sector and fleet replacements lifted revenue of the equipment segment Barloworld’s largest segment by revenue in Southern Africa by 41.8% to R10.2bn.

Operating profit from core trading activities before foreign exchange gain and losses increased by just over a third to R878m. The order book, a record of all the orders that the company has received from its customers, improved more than a fifth to R5.7bn.

The revenue of Ingrain, previously known as Tongaat Hulett Starch before Barloworld bought in 2020, advanced almost a quarter to R2.8bn, because of higher commodity prices and greater export volumes offsetting flat domestic sales volumes.

“Volumes in the alcoholic beverages sector were flat yearon-year, while the confectionery sector continued to show robust volume growth. The latter was offset by reduced volumes in the coffee creamer sector attributable to the effect of power outages and demand constraints,” the company said.

Sales soared in Mongolia as China reopened its borders, allowing the free flow of trade after about three years of strict zero-Covid restrictions.

The 44.6% rise in sales to $62.6m was largely because of prime product sales, such as machines.

The company spun out its car rental and leasing business into Zeda, which listed on the JSE in December. The exit allowed it to pay out R1.6bn in a normal and special dividend.