TOUGH AS NAILS

Barloworld’s results beat expectations with equipment division ploughing ahead

THE SOUTHERN African equipment division of listed distribution group Barloworld has secured new contract orders worth a total of $72 million (R846m) related to the Moatize coal mine expansion by Vale in northern Mozambique.

Clive Thomson, the group chief executive of Barloworld, said yesterday the division had in the six months to March received an order worth $42m directly from Vale for eight Caterpillar 793D mining trucks and one Caterpillar 6090 hydraulic mining shovel and concluded a rental agreement for eight Caterpillar MT4400 electric mining trucks.

He said the Ncala corridor line from Tete to Ncala, which was critical to the future development of the Moatize mine, because it provided the export coal capacity, had now been completed and had resulted in a second major order.

Thomson said this order worth $30m from Mota-Engil Africa, which had received an 18-month mining contract from Vale for the phase two expansion of the Moatize site, was for a combination of mining trucks and hydraulic shovels.

He added that Vale needed 90 trucks by 2018, and Barloworld had invested $11m in a new warehouse in the Tete province in preparation to support that equipment.

Thomson said the mining sector was expected to remain under pressure this year and possibly well into next year but aftermarket revenues were expected to show continued growth.

He said the equipment business in Russia was under the most revenue pressure due to commodity price weakness and sanctions, resulting in the mining industry still delaying large greenfields and significant fleet replacements.

However, Thomson said aftermarket revenues, like in southern Africa, were very pleasing in the six months to March and accounted for 60 percent of total revenues in Russia.

Barloworld’s equipment business in Iberia reported a profit of R10m in the six months to March, the first profit it has made since the global financial crisis and achieved a R42m on the turnaround on the loss incurred last year.

“The major reasons for the turnaround is the operating cost base. We have now taken over € 80m (R1 billion) out of our cost base in Spain from where our costs were at the peak in 2007,” he said.

Barloworld yesterday reported a 16 percent growth in headline earnings a share from continuing operations to 367c in the six months to March from 316c in the previous period. Revenue rose by 3 percent to R30.7bn from R29.9bn. Operating profit increased by 6 percent to R1.74bn from R1.64bn.

Sarah-Jane Alexander, an analyst at Coronation, said Barloworld had delivered a good set of results that showed the resilience of the group’s equipment aftermarket business.

Barloworld shares on the JSE rose 0.26 percent to close at R98.05.