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Metair delivers record performance in difficult environment

Metair delivers record performance in difficult environment
  • Revenue up 8% to R10.28 billion
  • Operating profit 19% higher at R1.00 billion
  • HEPS increased 16% to 327 cents
  • Dividend per share of 100 cents declared, up 25%
  • Continued strong performance from both the Energy Storage and Automotive Component verticals
  • Successful first investment in lithium-ion business and technology

Metair, a leading international manufacturer, distributor and retailer of energy storage solutions and automotive components, today announced its results for the twelve months to 31 December 2018.

Group revenue increased 8% to R10.28 billion and operating profit grew 19% with the group operating margin improving to 9.8% from 8.9%, supported by a 16% improvement in operating profit from the Automotive Components vertical and a 17% improvement in the Energy Storage vertical. Group earnings before interest, tax, depreciation and amortisation (EBITDA) increased 9.4% to R1.33 billion and headline earnings per share rose 16% to 327 cents. Group borrowings decreased to R1.8 billion with the net debt/equity ratio ending the period at an appropriately conservative 30%.

Theo Loock, Metair’s Managing Director, commented: “This is a record performance for us and a fantastic set of results given the handful of challenges we had to navigate including currency volatility and subdued economic growth experienced across our markets.

“Contrary to the reporting trend by South African businesses that have invested overseas, we saw a strong contribution from our overseas acquisitions in the Energy Storage vertical, particularly Mutlu Akü in Turkey, which managed to outperform the Turkish Lira currency weakness for a fifth year in a row, and Rombat in Romania which operated at full capacity in the second half. These results were also bolstered by good volume throughput from our Automotive Components vertical, supported by its continued focus on product and customer diversification.”

The Energy Storage vertical reported a combined growth in revenue of 3% to R6.38 billion and increased profit before interest and tax (“PBIT”) by 17% to R692 million. Exports improved, in line with Metair’s long-term strategy, through two automotive supply contracts with strategic aftermarket customers, one being in the USA.

Despite challenging global political and trade conditions Mutlu Akü continued its resilient in-country performance, delivering a 27% increase in turnover and 55% increase in profitability owing to margin expansion from increased exports, good cost management and price recoveries which offset the Turkish Lira currency weakness. This translated into an improved operating profit contribution in Rand of R428 million.

Rombat performed well, with an in-country increase in profit of 29% translating into a profit contribution in Rand that increased 31% to R87 million.

The turnaround at First National Battery is according to plan and the business delivered improvements in manufacturing and marketing efficiencies, while investing in promoting the First National Battery brand and retail network, combined with customer focused improvement plans to increase localisation. First National Battery delivered a 6% improvement in PBIT to R162 million despite the second half being negatively impacted by labour instability linked to bi-annual wage negotiations.

Volume growth underpinned by higher levels of exports, continued expansion and deepening of localisation, and efficiencies derived from production and labour stability saw the Automotive Components vertical achieve a 16,3% rise in revenue to R5.07 billion and a pleasing 16,5% increase in PBIT of R509 million.

In February 2018, Metair acquired a 35% shareholding in Prime Motors which is being geared to be Metair’s incubator and research and development centre for lithium-ion battery development. The period was eventful for Prime Motors which profitably moved from pre-sales to first customer engagement and sales. It secured its first lithium-ion coating and cell assembly manufacturing line, developed a low temperature lithium-ion starter battery, received its first request to quote for lithium-ion starter batteries and supplied several lithium-ion battery pack solutions, while launching the first electric vehicle business in Romania in partnership with Rombat. The next step to accelerate this businesses growth is for the installation and commissioning of the lithium-ion line to be approved by the investment committee.

“We are pleased with our international investments. Aside from the great performances out of Turkey and Romania we have seen the benefit of technology transfer through the partnership with Prime Motors, Moll Germany has taught us a valuable technology lesson, has introduced us to a major German OEM customer and presented our first lithium-ion starter battery opportunity.” commented Loock.

Metair’s strategy has always been customer, market and technology driven and in line with the automotive industry principle of continuous improvement, Metair reviews and confirms its strategy annually.

Metair’s latest strategy review has shown that it will best secure global relevance by fully utilising its current lead acid base energy storage businesses while engineering a cost-efficient way of gaining relevance with alternative lithium-ion technology product solutions. “The benefit of such a technology-focused strategy is that it is possible to gain customer take off and investment support agreements prior to any major capital commitments in new technology manufacturing facilities. It also aligns with Metair’s European customers’ call for dual technology solution providers.” added Loock.

Looking forward, Loock commented: “Geo-political uncertainty and wage negotiations are expected to have an impact in South Africa and Turkey, driving concern around consumer confidence and labour volatility. We do however expect favourable conditions for our automotive component business in the short to medium term, based on the increased stability and certainty brought about by the extension of the APDP, conclusion of the South African Automotive Master plan (SAAM), as well as expected record vehicle export levels.

“We are well positioned to benefit from the shift towards increased connectivity, innovation and full electric vehicles. Our focus is on expanding our aftermarket lead acid battery export customer base including production of customer branded aftermarket product requirements and improving First National Battery’s performance in South Africa.”

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