Barloworld’s share price was down 12.5% at close of trade on Friday after it said it had told US authorities of possible export control violations, which it is probing.
They entail sales of certain goods to its Russian subsidiary. The group said it submitted an initial notification of voluntary self-disclosure to the US commerce department’s Bureau of Industry and Security regarding the possible violations.
Shares in the company briefly slumped by as much as 15%, before recovering to close 12.47% lower at R81.17, in its biggest one-day fall in more than 17 years.
The company said in a statement on Friday it had engaged the services of independent firms with the necessary expertise in connection with the internal investigation and the voluntary self-disclosure.
The industrial conglomerate said the precise details of whether there had been violations and if so, the extent of such violations, had not yet been determined, and remained subject to the investigation and voluntary engagements with the Bureau of Industry and Security.
“In line with the company’s commitment to upholding high standards of transparency, a further update relating to the above will be provided to the market in due course,” it said.
In May 2023, Business Day reported that ratings agency Moody’s Investors Service warned that Barloworld’s exposure to Russia and the group’s operational concentration in SA, which exposed it to the socioeconomic, political and regulatory environment of the country, were risks to its ratings.
Barloworld’s credit metrics were expected to weaken that year due to disruptions to its Russian business — where the group generates just over a fifth of revenue — but would stay at adequate levels, Moody’s said.
Russia is an important market for Barloworld, but the Kremlin’s invasion of Ukraine in 2022 and the subsequent sanctions against Moscow led Barloworld to write down the value of its assets by R1.03bn in the six months to end-March 2022.
In its latest interim results, Barloworld said revenue for the six months to end-March for its Russian operation, Vostochnaya Technical (VT), fell 28% to $105.6m compared with the previous year, however, operating profit at $20.6m, was down only 22% due to the higher aftermarket revenue mix.
The decrease in VT’s revenue was attributable to reduced product lines, supply chain constraints and the sanction regime against Russia. It said the unit’s working capital remained elevated due to supply chain constraints, reduced supplier payment terms and payment terms provided to customers resulting in cash utilised of $24.5m since September 2023.
As demand for parts remained strong and demand for construction machines improved during the summer months, the company said it expected an improved cash generation position over the remainder of the 2024 financial year.
VT continued to be self-sufficient in terms of its funding requirements. The firm order book would remain at low levels with sales now linked to the smaller construction products, Barloworld said.
Bloomberg reported on August 6 that a Saudi Arabian firm was in talks to buy Barloworld. It said Saudi Arabia’s Zahid Group was in talks to acquire an African distributor of Caterpillar’s equipment, citing people with knowledge of the matter.
Barloworld, which is valued at about R15bn on the JSE, in April said it was in discussions that could affect its share price, but did not elaborate.
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