FY22 HALF-YEAR RESULTS SHOW A ROBUST PERFORMANCE AND STEADY PROGRESS WITH STRATEGIC PROJECTS FOR FUTURE RETURNS
• R1.7 billion Ford investment project progressing as planned with the recent launch of Hesto facility
• KZN flood business interruption well managed with R360m insurance claim progressing
• Significant non-cash impact of hyperinflation accounting for Mutlu Aku in Türkiye
• Normalised EBITDA of R743 million and normalised HEPS of 152 cents
• Robust management of balance sheet and liquidity
15 September 2022 – Metair, a leading international manufacturer, distributor, and retailer of automotive components and energy storage solutions, reported a resilient set of interim results for the six months ended 30 June 2022, despite a challenging and volatile trading environment.
Riaz Haffejee, CEO of Metair commented: “Our teams did well to overcome several obstacles during the first six months of 2022. Various measures were taken to responsibly manage the business and ensure continuity, especially in our investment projects which will support new vehicle model launches and secure attractive returns into the future. The results are unfortunately overshadowed by hyperinflation and certain once-off impacts whereas the underlying performance is a creditable outcome.”
The reporting period was characterised by reduced Original Equipment Manufacturer (OEM) production volumes in South Africa due to raw material shortages, supply chain delays and the KwaZulu-Natal (KZN) flooding, as well as sharp increases in energy costs in Europe owing to the conflict in Ukraine. Project costs incurred ahead of new vehicle model launches and a ten-day labour strike at Mutlu Akü (Mutlu), as well as the non-cash impact of hyperinflation accounting for Mutlu skewed the performance. This announcement provides normalised figures which exclude these impacts to provide a clearer indication of the underlying performance.
Group revenue was 2% lower at R5.8 billion while group operating profit decreased by R400 million to R144 million, at a reduced operating margin of 2.5%. On a normalised basis, operating profit is a healthy R557 million. EBITDA declined from R701 million to R300 million but is R743 million when normalised. Headline earnings per share dropped from 170 cents to 45 cents but on a normalised basis is 152 cents.
Automotive Components contributed R2.7 billion in revenue, following a 10% decline in OEM production volumes, while operating profit was R183 million with margins diluted by manufacturing inefficiencies, premium logistics costs as well as project costs incurred.
Due to the KZN flooding, the group’s major OEM customer, Toyota South Africa Manufacturing (“Toyota”), was forced to halt production at its Prospecton plant for several months in the second quarter, affecting turnover in the Automotive Components division. From the onset of the floods, Metair focused on assisting employees, customers, and other stakeholders as best as possible, while working with Toyota to support its recovery, and managing ongoing cash flow and liquidity needs across the group. Metair ensured a successful return to production including availability of materials to support the reopening of the Toyota plant which recommenced production in the third quarter. Production has climbed steadily since with the return to normal production volumes anticipated within the fourth quarter of the year. A business interruption insurance claim, estimated to total R360 million (before tax and minorities) is advancing, with R150 million in cash payments received to date and the total claim anticipated to be finalised in the second half.
The Group progressed its new vehicle model launch investment projects which remained within budget and on time. Project costs of R115 million were incurred ahead of new model launches, the most significant being the Ford Ranger, with production scheduled to commence in the fourth quarter of FY22.
Hesto Harnesses (“Hesto”) was the largest beneficiary of the R1.7 billion Ford Ranger investment with its new 35 000m2 wire harness facility officially opened earlier this week in KwaDukuza, bolstering employment in the region with 4000 new positions created. “The Group continues to deliver on customer commitments and is well aligned with the South African Automotive Master Plan to 2035, driving localisation, developing skills and creating employment,” added Haffejee.
The Energy Storage Vertical delivered a 14% improvement in turnover which increased to R3.7 billion, following a strong performance across all sales channels. The operating margin was -1.2% and the division recorded an operating loss of R44 million, reflecting the impact of hyperinflation accounting. Excluding hyperinflation, operating profit is R273 million, and the operating margin is 7.7%.
Internationally, inflation rates increased across all territories, mainly due to higher energy costs driven by the conflict in Ukraine. Mutlu experienced resilient market demand for lead-acid batteries in all sales channels, but sales volumes and profitability were impacted by a ten-day labour wage strike during June 2022. As inflation in Türkiye rose dramatically during the first half, hyperinflation accounting was applied to Mutlu for the period. Rombat’s sales were impacted by dampened consumer confidence given the conflict in Ukraine and the business’ performance was also brought down by a lag in energy cost recovery from customers. First National Battery’s volumes were marginally lower with efforts to improve competitiveness and market share progressing as planned.
Capital expenditure for the period, including Hesto and intangible assets was R454 million, with R67 million allocated to maintenance, R375 million to expansion capex and R12 million to health and safety, improving the group’s competitive position and efficiency. Majority was focused on capacity expansion for the Automotive Components Vertical to invest in facilities, tooling and machinery required to support planned new model launches and facelifts.
Net working capital increased by R820 million to R3 billion due to the impact of Toyota halting production as well as the strike at Mutlu and lead times for imported components which resulted in a build-up of stock. Cash and cash equivalents decreased to R588 million, while net debt increased to R2.4 billion due to the operational challenges experienced, additional funding taken up for new projections and advanced to Hesto, increased working capital investments and the impact of hyperinflation on Mutlu’s contribution.
“The period saw us prudently manage our balance sheet and liquidity to ensure we could deliver on our commitments, and we should see the debt and net working capital levels normalise in the second half. Our funders recognise the short-term nature of this position and have been supportive in discussions around the waiver of covenants which is expected to be implemented soon. We continue to closely monitor the group’s financial position and focus on effective cash management, considering customer requirements, planned investments and conclusion of the business interruption claims,” commented Sjoerd Douwenga, Metair’s CFO.
Commenting on the outlook for the year, Haffejee concluded: “We are intent on supporting successful launches of new models and facelifts with effective project management, improved operating efficiencies and working capital cost control being key focus areas as OEM production volumes grow. Our business has created a solid platform for growth and our teams are working hard at unlocking opportunities for further value creation as the environment recovers.”
|Louise Fortuin||+ 27 (0)71 605 4294||Bandile Nkambule||+27 (0)82 815 1812|
NOTES TO EDITORS
Metair Investments Ltd (Metair) is a publicly owned company listed on the Johannesburg Stock Exchange. The Group is headquartered in Johannesburg and manages an international portfolio of companies that manufacture, distribute and retail products for its energy storage and automotive component verticals, exporting to approximately 46 countries.
The energy storage segment manufactures batteries for automotive, telecoms, utility, mining, retail and materials/products handling sectors. Automotive batteries are mainly supplied to the aftermarket through Metair’s unique aftermarket distribution channels and franchised retail networks and are supplied to automotive original equipment manufacturers (OEMs). Aftermarket products are exported to approximately 46 destinations while non-automotive products are mainly sold into sub-Saharan Africa and Turkey.
Automotive components include original equipment (OE) components used in the assembly of new vehicles by OEMs as well as spare parts and other products used in the automotive aftermarket. These include brake pads, shock absorbers, lights, radiators and air conditioners. This segment also produces generic aftermarket products for use in the increasing number of imported vehicles.
For more information on Metair and the group’s subsidiaries please visit the website at: www.metair.co.za