Barloworld’s share price leaped 6.82 percent to R95.71 yesterday morning after a voluntary trading update indicated double-digit revenue and operating profit increases in the 11 months to August 31.
“This achievement is driven by a robust performance from the Equipment businesses, together with the good growth of Ingrain during the period,” the group said in a statement.
In Russia operations, revenue and operating profit was 6.3% ahead in dollar terms and the operating margin of 11.4% was steady compared with last year.
But the firm order book for Russia at August 31 reduced substantially to $30 million compared to $94m at March 31, 2022 due to the impact of sanctions implemented by various countries.
In addition, during the second half of the financial year, the business in Russia successfully cancelled contracts with customers valued at more than $175m, without negative consequences, and the company has diverted most of these units to other dealers.
“The group continues to manage risks and exposures in Russia, including a strong focus on the needs of our employees through a very uncertain and challenging period, while remaining agile and adaptable to ensure compliance with an ever-changing regulatory environment,” the group said.
Cost cuts were under way and working capital was being right-sized in line with expected revenue reductions.
Barloworld’s Equipment Southern Africa division saw strong sales, after sales and rental income. These contributed to a 19.6% increase in revenue.
Operating profit was up 17.6% – cost efficiencies and lean principles were now embedded in the business, the group said.
Bartrac, the joint venture in Democratic Republic of Congo, would report positive associate income compared to a loss in August 2021. The firm order book amounted to R5.3 billion on the back of strong mining demand.
Barloworld Equipment Eurasia revenue fell 2.6% in dollar terms due to lower revenue generated by Mongolia.
Trading in Mongolia over nine months was negatively impacted by border closures and bottlenecks at Chinese ports due to strict Covid-19 measures implemented by the Chinese government. Many mines also suspended operations as they could not export commodities through the Chinese border.
However, these restrictions had recently been lifted and products had started flowing through the borders at a more normalised rate, with an “immediate positive impact on trading in the region for August, which continued in September 2022”.
Equipment Eurasia operating profit ended 5.3% lower in dollar terms, despite the 6.3% increase from Russia, which was offset by the decreased operating profit in Mongolia.
Ingrain's results reflected revenue and Ebitda (Earnings before interest, taxes, depreciation and amortisation) well ahead of the preceding 11-month period, on the back of increased sales volumes, improved co-product realisations and higher international soft commodity prices.
Revenue was up 36.4%, with an operating margin of 12.2% that was 60 basis points higher than the comparative period. Operating profit was up 40%.
In the domestic market, the alcoholic beverages sector performed well, while recovery in the confectionery and prepared foods sectors supported domestic volume growth and offset the impact of softening demand from the coffee creamer sector.
A focus on export sales saw increased volumes made possible by increased production from Ingrain’s operations.
In the car rental operations, demand had improved, but global supply chain constraints continued to impact the procurement of vehicles and demand remained below pre-pandemic levels.
Operating profit increased by more than 110%. Fleet utilisation averaged 80% due to process efficiencies and stringent out-of-service vehicle management. The used car business continued to maximise profit margins driven by the constraints in new vehicle supply.
The exit from the Transport division was concluded successfully.
BUSINESS REPORT