KEY GROWTH PROJECTS ON COURSE TO DRIVE SUSTAINABLE RETURNS
- Strategic recovery plan unfolded broadly as anticipated, supporting strong revenue growth
- Margins well-managed despite several manufacturing disruptions and extraordinary costs
- Record level of headline earnings per share achieved and dividend of 90 cents per share declared
- Well-positioned for future growth and returns with investment ramp-up progressing as planned. Short-and long-term value creation opportunities are being pursued
- Deepened commitment to sustainability and environmental stewardship
17 March 2022 – Metair, a leading international manufacturer, distributor and retailer of automotive components and energy storage solutions, today announced a robust annual financial performance for the year to December 2021.
Group revenue increased by 23% to R12.62 billion, reflecting a solid rebound following the lock-down restrictions in 2020. Group operating profit rose to R1.16 billion from R0.6 billion, with the operating margin at 9.2%, compared with 5.5% in 2020. The group achieved an 80% increase in EBITDA (including equity earnings and impairments) to R1.4 billion, and headline earnings per share more than doubled to 354 cents, the highest delivered to date. The board declared a dividend of 90 cents per share in line with Metair’s dividend policy.
Riaz Haffejee, CEO of Metair commented: “Steady progress against our strategic initiatives saw us deliver a record performance and continue to demonstrate our resilience in an environment that remains constrained by the effects of COVID-19. Energy Storage performed exceptionally well and ahead of our recovery plan, by capturing all round increases in market demand. The recovery in Automotive Components was more protracted with the strong growth in customer volumes in the first half not repeated in the second half, due to supply chain-related disruptions and other once off production interruptions. Our strategic projects including expansion works at Hesto are on track, enabling us to build out the capacity to support our current and future growth. OEM production is expected to grow with an increased focus on local production and I am confident that our ongoing investments will deliver returns and drive meaningful value creation over the short to long term.”
The Energy Storage vertical recorded an 18% increase in sales of automotive batteries to 8.8 million units with revenue of R7.6 billion showing the same level of increase. The volumes achieved beat 2019 (pre-Covid) levels, supported by strong aftermarket demand and exports from Mutlu Akü. EBIT rose by 51% to R887 million, with operating profit in local currency showing an improvement at First National Battery and more than doubling at Mutlu Akü. While operating margins increased from 9.2% to 11.7%, they were affected by a lag in recovery of high second half-energy costs. Sales of industrial batteries were consistent at R530 million with First National Battery continuing with its shift to a trade-focused model to counter the effect of technology, market and demand shift.
The Automotive Components vertical (including Hesto) contributed R6.7 billion in revenue, a 36% improvement compared to the 2020 reporting period. Operating profit increased from R88 million to R257 million, and the operating margin recovered from 1.8% to 3.8%. This was achieved despite manufacturing inefficiencies and premium logistics costs brought about by the global supply chain disruptions, and South Africa-specific production interruptions due to the steel industry strike and July civil unrest, as well as strategic project costs to support investment in future growth. As a result of supply chain disruptions and component shortages, including semi-conductor chips, South Africa’s OEM production ended the year at 503,000, reflecting a 21% improvement on 2020 levels but remaining well below 2019 levels and expectations.
etair employed a greater inventory holding strategy to mitigate shipping delays and freight costs, with net working capital increasing by 18% to R2.2 billion as a result. Cash and cash equivalents ended the period at R962 million, and net debt increased from R805 million to R1.3 billion, while net finance charges decreased to R145 million, owing to lower interest rates.
“We have financing facilities in place to support operations as well as our expansion programmes, and our strategic build-up of inventory will provide a buffer against ongoing supply chain challenges. We are focused on improving operating efficiencies and continue to drive effective project management as we proceed with our capex investments to support our growth plans and enhance our competitive position,” commented Sjoerd Douwenga, Metair’s CFO.
Capital expenditure (capex) including investment in intangible assets, totalled R575 million for the year, with a portion of the planned capex rolled over into 2022, due to the impact of global supply chain shortages and shipping delays. For 2022, just over R1 billion in capex has been allocated (including Hesto) for expansion, maintenance, and health and safety. Capex allocated for the Automotive Components vertical has increased, to invest in facilities, tooling and machinery required to support planned new business, new model launches and facelifts.
Metair is on a journey to deepen its commitment to sustainability and is investigating initiatives to enhance its environmental stewardship and secure the Group’s positioning in the future of green manufacturing. Measurement and reporting on ESG metrics are being refined, including setting formal key performance indicators and targets to drive improvement and sustain progress. These efforts are extended through Metair’s sponsorship of the Toyota Wessels Institute for Manufacturing Studies’ (TWIMS) Green Manufacturing chair which promotes executive expertise in this arena and actively combats climate change across Southern Africa. “During 2022, we will increase access to renewable energy by commencing with the roll out of solar power at our facilities, and we will be upgrading our factories to enhance working conditions and safety,” added Haffejee.
The trading environment will remain challenging during 2022 due to ongoing supply chain difficulties and semi-conductor shortages which are expected to be compounded by the Russia/Ukraine conflict. Metair is seeking alternative markets as OEM and battery sales into the EMEA region are likely to be impacted. The Automotive Component vertical will focus on resourcing to successfully support the launch of major new customer models in the second half, and on ensuring the highest quality, best cost, and on-time delivery for all customers. The volume outlook for the Energy Storage vertical remains positive given increased demand for absorbed glass matt batteries across all channels. First National Battery will complete the shift of its industrial battery business to a trading model, and the installation and commissioning of the lithium-ion manufacturing line will be a core project focus at Mutlu Akü.
Louise Fortuin + 27 (0)71 605 4294
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