Diversified industrial group Barloworld has reported lower annual earnings in a challenging trading environment, with the CEO warning that geopolitical risk has overtaken inflation as the primary risk factor.
Revenue for the 12 months to end-September decreased by 6.9% to R41.9bn, primarily driven by subdued trading results from Equipment Southern Africa (down 12.7%) and lower activity from Vostochnaya Technica (VT) compared with the previous financial year, the group said in a statement on Monday.
Operating profit from core trading activities was 12.6% lower at R3.8bn. Profit for the year from continuing operations declined to R1.95bn from R2.03bn before.
Headline earnings per share (HEPS) from continuing operations decreased by 12% to 1,022c.
While earnings before interest, tax, depreciation and amortisation (ebitda) declined by 7% to R5.1bn, the group maintained an ebitda margin of 12.2% in line with the prior year.
Net cash outflow before financing activities was R0.3bn compared with an inflow of R0.4bn the previous year.
A final dividend of 310c per share was declared, making a total dividend of 520c, 4% higher than a year ago.
The results were as expected, the group said. At the beginning of the financial year, CEO Dominic Sewela cautioned against an expected slowdown in activity, driven by the cyclicality of the equipment businesses which were 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,” Sewela said.
Equipment Southern Africa’s results reflected a resilient performance amid softer global economic recovery and geopolitical uncertainties, it said. Revenue was down 12.7% at R25.7bn, mainly driven by a 27% drop in machine sales. The aftersales segments traded ahead of the prior year, with the parts and the rental business contributing favourably to the sales mix.
Eurasia’s performance was underpinned by the “exceptional growth” in Barloworld Mongolia. Eurasia’s revenue of $490m was 8.6% higher at $451m, with Mongolia generating revenue of $261m, up from $157m the previous year. VT’s revenue declined by 22% to $229m due to the prolonged sanctions environment and the contraction of its addressable market.
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 R6.5bn, with lower volumes offset by increased selling prices.
The group managed to reduce debt by 29% to R7.9bn, it said.
Sewela said the group expected consumer and business confidence to be boosted by lower global headline inflation and the ensuing monetary policy easing.
SA trading conditions were expected to improve, 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.
“We are optimistic about the future prospects while continuing to exercise caution,” he said.
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