Barloworld (JSE code: BAW) has today released results for the year ended 30 September 2024, reporting revenue of R41,9-billion. The decline of 7% year-on-year was primarily driven by subdued trading results from Equipment southern Africa (down 12,7%) and lower activity from Vostochnaya Technica (VT) compared to the previous financial year.
The results are as expected. At the beginning of the financial year, group CEO of Barloworld, Dominic Sewela cautioned against an expected slowdown in activity, driven by the cyclicality of the Equipment businesses which are exposed to the mining sector.
“Our results for 2024 bear testament to the effectiveness of our ‘Fix, Optimise and Grow’ strategy in navigating these challenges. Our portfolio diversification and strategy execution through the Barloworld Business System has enabled us to weather the volatile macroeconomic backdrop.”
While EBITDA declined by 7% to R5,1-billion, the group maintained an EBITDA margin of 12,2% in line with the prior year. Operating profit from core trading activities declined by 12,6% to R3,8-billion.
These results are taking into account a US$10-million provision related to an “earnout” structure for the acquisition of Barloworld Mongolia which has outperformed expectations as well as a US$26,7-million provision related to inventory obsolescence and restructuring costs for VT.
The group finance director Nopasika Lila explains that on a normalised basis before these extra ordinary items, EBITDA has increased by 9% and operating profit from core trading activities has increased by 3%.
Barloworld succeeded in paying down debt, reducing gross debt by 29% from R11,1-billion to R7,9-billion. The group also made a final payment of R632-million, finalising the derisking of the United Kingdom pension fund.
The group achieved a return on invested capital (ROIC) of 15,7% compared to the 17,7% generated in the prior year, which is still above the threshold of 14%.
Sewela announces the board’s decision to declare a final ordinary dividend per share of 310 cents, bringing the total dividend to 520 cents per share. The total dividend is 4% higher than the prior period and is in line with the group’s stated dividend policy cover of 2,5 to 3,0 times normalised headline earnings.
Equipment southern Africa’s results for the year ended 30 September 2024 reflect a resilient performance amidst softer global economic recovery and geopolitical uncertainties. Revenue ended 12,7% behind the prior year at R25,7-billion (2023: R29,5-billion), mainly driven by a 27% drop in machine sales ending at R10,7-billion (2023: R14,7-billion) coming off the previous fleet replacement cycle. The aftersales segments traded ahead of the prior year, with the Parts and the Rental business contributing favourably to the sales mix.
Equipment Eurasia’s performance was underpinned by the exceptional growth in Barloworld Mongolia. Eurasia’s revenue of US$490-million is 8,6% higher than the prior year at US$451-million, with Mongolia generating revenue of US$261-million, up from US$157-million the previous year. VT’s revenue declined by 22% to US$229-million in the face of the prolonged sanctions environment and the contraction of its addressable market.
In rand terms, Eurasia generated R9,1-billion in revenue, which was 10,5% higher than the previous year’s R8,2-billion. The improvement in rand terms was assisted by a 1,7% weakening of the rand to the dollar against the preceding year.
Ingrain delivered a credible performance, supported by deliberate turnaround actions initiated in the first half of the year to optimise business structures and rebase fixed costs in line with revenue growth. The business generated revenue of R6,5-billion (2023: R6,6-billion), with lower volumes offset by increased selling prices.
EBITDA, at R787-million, was down 8,4%, representing an improvement against the 20% decline recorded at the interim reporting period. Operating profit was R498-million, down from R593-million in 2023, owing to rising fixed costs in line with the initially anticipated growth in the first half.
Sewela says that geopolitical risk has overtaken inflation as the primary risk factor looking ahead into 2025.
Barloworld expects consumer and business confidence to be boosted by lower global headline inflation and the ensuing monetary policy easing. Locally, trading conditions are expected to improve somewhat, driven by a revival in consumer and business sentiment stemming from the lower interest rate environment, the government of national unity, and progress made in reforming the electricity and logistics sectors.
