Barloworld revamp complete ready for acquisitions, gains

BARLOWORLD has exited non-core businesses and the focus is on organic and acquisitive growth in its industrial equipment and services and consumer industries divisions, CEO Dominic Sewela said.

The group yesterday reported improved trading activity across most of its operations in the six months to March 31, which with cost containment resulted in a 20.3% increase in headline earnings per share to 578 cents.

“The performance cements the decisions with respect to our strategy and focus on the core verticals of industrial equipment and services and consumer industries,” he said in a statement. The interim dividend was raised to 200c per share from 165c.

Following unbundling and listing of Zeda in December 2022, and the disposal of the remaining logistics business, the key exits out of non-core businesses had been completed, said Sewela.

“The group is now poised on the growth agenda with both an organic and acquisitive growth strategy focused on investing within our core verticals.

“It is also pleasing to see this quality of results despite the many challenges presented by the operating environment,” he said.

In the six months revenue from continuing operations increased 12.9% to R20.8 billion. Operating profit improved 16.5% to R2.1bn.

The equipment Southern Africa division benefited from improved operational activity, and to a lesser extent the weaker rand/dollar exchange rate.

Activity in the mining sector, fleet replacements, and a good contribution from the Bartrac JV saw the division report a 38.4% and 31.5% increase in revenue and operating profit to R13.1bn and R1.1bn, respectively. Earnings before interest, tax, depreciation and amortisation increased 22.7% to R1.5bn.

The equipment Eurasia division also had a solid first-half supported by demand for after-market products in Russia, and a good performance in Mongolia, which benefited from the opening of the borders with China.

Its overall revenue of $224 million (R4.35bn) was 39% lower than the prior period buffered by the improved contribution margin of Mongolia, as Russia’s revenue fell 53% to $147.5m. Operating profit fell 10.5% to $38.6m.

In the consumer industries division, Ingrain was supported by higher commodity prices and growth in export volumes, although domestic sales were flat.

Revenue rose 15.3% to R3.3bn; operating profit was R331m; and cash generation improved to R127m from R76m.

The operating margin decreased from 12.9% to 10.1% due to lower contribution margins, and increased overheads on the back of investments in plant maintenance and critical skills.

Sewela said the total equipment Southern Africa order book was strong at R5.7bn compared to R4.8bn at September 30, 2022, while the Eurasia order book had been impacted by Russia, though the business was self-sufficient in terms of its funding requirements.