Metair ramping up again after recording R215m loss

METAIR, international maker, distributor and retailer of energy storage solutions and automotive components, slid into a R215.8 million net loss in the six months to June 30 from R330.3m profit at the same time last year due to Covid-19 lockdown-related operational wind downs.

However, Metair chief executive Theo Loock said yesterday in a telephone interview that operations had ramped up swiftly as lockdown restrictions eased, with the automotive component businesses operating at 83 percent average capacity utilisation in June from zero in April, while energy storage operations were at 100 percent capacity compared with 45 percent in April. The headline loss came to 56 cents per share, versus 160c headline earnings per share in the prior corresponding period.

Loock said it was a good result given the difficult circumstances, supported by cost containment measures.

Revenue fell 19 percent to R2.5 billion in the six months to June 30, but strong working capital management saw strong cash generation and free cash flow came to R339m by the end of the period. Operating profit of R74m and earnings before interest, taxes, depreciation and amortisation (Ebitda) of R178m was achieved.

Sjoerd Douwenga, the chief financial officer of Metair, said the dividend declared in March was deferred to ensure compliance with liquidity requirements, notwithstanding the fact that the group had a strong balance sheet.

Net debt levels increased just slightly to R1.4bn by the end of the interim period. Net cash amounted to R1.2bn, assisted by deferment of the 2019 year end dividend payment, lower capital expenditure and better working capital management. Available finance facilities came to R2.8bn.

Metair was focusing on new model launch projects as well as the most sustainable projects, customers, models, and markets, and had approved a R1.3bn investment to support new projects that could deliver R25bn to R28bn of turnover over a seven-year period starting in 2022.

Douwenga said the automotive component vertical could achieve profit margins of 4 to 6 percent in the second half off this year, off slightly lower volumes, while the energy storage verticals could range between 8 to 10 percent, providing an “encouraging outlook” for the second half at this stage.

Loock said the automotive components vertical was recovering from increased demand for new vehicle models planned by Original Equipment Manufacturers (OEM), and by derivative facelifts, while in the energy storage vertical, demand was being driven in particular by a stronger after-market for batteries due to a stronger sector industry and increased activity by essential service providers.

In the automotive components vertical revenue fell 38 percent to R1.8bn and an operating loss of R48m was recorded. The vertical contributed Ebitda of R21m.

The energy storage vertical performance was aided by Mutlu Akü (Turkey) and Rombat (Romania) being able to trade throughout, with after-market and export sales offsetting OEM sales losses. Automotive volumes fell 27 percent, mainly due to reduced OEM sales across all territories and reduced export sales volumes out of Turkey, while industrial sales volumes in South Africa and Turkey declined 35 percent on the back of particularly weak demand.

Metair had created a strategy for its growth post the pandemic and the focus was a multi-stepped U-shaped recovery designed to avoid an L-shaped recovery, specifically supported by the automotive components vertical recovery, which was project-based, given the anticipated full-year decline of 30 percent in South African production volumes in 2020.

In addition to projects already announced, there were further model launches and planned model face lifts that could have a positive effect on the local automotive sector, even in the short term.

From an energy storage perspective, the focus was on improving insight into after-market demand and on structurally adapting the cost base and business activities to increase agility.

Metair shares closed 0.72 percent higher at R18.14 on the JSE yesterday.