Battery and vehicle component maker Metair says it is surprised with the sharp recovery from Covid-19 in the vehicle market, prompting it to restore its dividend.
The resumption of dividend payment comes as the company gears up to spend as much as R1.5bn on production capacity after scoring big SA contracts.
Covid-19 had shuttered operations, disrupted global supply chains and led to a sharp fall off in vehicle sales, at least in SA, but Metair expects domestic vehicle production to recover to roughly that of pre-Covid-19 levels in 2021.
Sales of new vehicles in SA remain under pressure, the group’s newly appointed CEO, Riaz Haffejee, told Business Day, but post-lockdown demand for aftermarket parts had been surprisingly good, while strong export demand had seen “flat out” production for much of the group towards the end of 2020.
A recovery in vehicle manufacturing in SA and Europe, robust demand for aftermarket parts, as well as cost-containment benefited Metair, whose cash almost doubled to R1.6bn at the end of December, while net debt fell 38% to R805m.
Group revenue fell 9% to R10.3bn to end-December 2020, while profit fell 71% to R185m. This is in the context of a R215m first-half loss, when revenue fell by more than a quarter. The group generates about 56% of its revenue from batteries — including First National Battery in SA, Mutlu Akü in Turkey and Rombat in Romania — and the rest from components, such as air conditioners and shock absorbers.
In 2020 full-year vehicle production was down 32% in SA, where Metair generates more than half of its revenue.
Metair, which has a market value of R3.6bn, declared a 75c final dividend to end-December, about a R145m payout, and had scrapped its 2019 dividend after Covid-19 hit.
“Looking at our second half we saw some quite exceptional cash-flow generation, cash on hand was much better than expected,” Haffejee said.
These are Haffejee’s first Metair results, having assumed the position of CEO in February. He took over from Theo Loock, who retired after almost 15 years in the position.
Loock signed a two-year consultancy contract with Metair. Before this appointment, Haffejee was CEO of Sumitomo Rubber SA, and had previously been an executive at Vodacom Business, and filled various managerial positions at BMW.
Metair believes the pandemic has strengthened a trend to ensure that component supply is close to vehicle manufacturers, and is gearing up to spend R1.3bn-R1.5bn on capital expenditure in 2021.
Metair has secured contracts for new vehicle types in SA, and vehicle facelifts, with big global manufacturers including Ford, Toyota and Volkswagen. Facelifts refer to changes to a vehicle type that do not include a complete redesign.
The group is also waiting for some product finalisation, with clarity expected in the middle of 2021, saying this could weigh on short-term automotive volumes, but with “substantial long-term benefits”.
Model life revenue linked to new investments is estimated at R32bn to R35bn, with a model life of 10 years, and with production expected to begin in 2022.
The group also completed a lithium-ion production facility in Romania at the end of 2019, the commissioning of the facility and commencement of lithium-ion cell production is planned for the second half of 2021. Lithium-ion cells are used for electric vehicles’ drive trains, as well as solar energy, among other applications.
The group is in the midst of a strategic review, including a decision on what direction to go in terms of its lithium-ion capacity.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.