Automotive components manufacturer and battery maker Metair expects full-year headline earnings per share (HEPS) from continuing operations to be as much as 20% lower as operating conditions remained challenging.
It expects to report HEPS for continuing operations of 78.56c-98c for the year to end-December compared with 98c a year ago. Continuing operations exclude Mutlu.
Regarding the group’s total earnings, which include Metair Turkiye, it expects a loss per share of 2,145.15c-2,154.95c, primarily due to the capital loss realised on the sale of Mutlu, and a headline loss per share of 185.33c-212.33c.
To mitigate and derisk against the increasing financial volatility of, and exposure to, the Mutlu Group in Turkey, Metair disposed of Mutlu in December. Mutlu is classified as a discontinued operation in the financial year ended December 2024 results.
Mutlu is expected to report a posthyperinflation loss after tax and interest of R486m up to the date of sale in December. Due to the high debt and trade creditor levels, equity proceeds of $1m were realised on the sale, and with the impact of hyperinflation and recycling of foreign currency translation losses, the loss on sale including costs is expected to be R4bn, Metair said.
The group implemented measures to reduce costs, optimise manufacturing capabilities and production efficiencies, rationalise unprofitable business lines and adjust commercial strategies during the year, it said on Friday.
The continued improvement initiatives and turnaround at Hesto Harnesses, Metair’s major wiring harness supplier, “was particularly pleasing when considering the significant losses incurred in the previous financial year”.
Metair said operating conditions remained challenging in its continuing operations throughout 2024, largely due to lower local production at SA original equipment manufacturers (OEMs) caused by weaker demand from traditional export markets, as well as market share shifts due to the influx of imported vehicles, especially from China and India.
Reduced production volumes, due to engine certification issues, at one of the group’s major customers, Toyota SA Motors, affected the results of most Metair subsidiaries.
These issues were resolved by the fourth quarter of 2024. Total local market vehicle production declined about 5% in 2024 compared with the previous year. Toyota SA Motors resumed normal line production in November but the delayed engine certification process exposed Metair to an annual volume decline of about 28%.
Group revenue from continuing operations was resilient despite challenging market conditions and is expected to be R11.8bn compared with R12.1bn the year before.
Earnings before interest and taxation is expected to range at R480m-R520m from 2023’s R633m at a margin of 4.1%-4.4%.
The restructuring of noncore operations, such as First Battery’s industrial business and Alfred Teves Brake Systems’ manufacturing line, had a temporary impact on reported earnings before interest and tax with R41m in one-off restructuring costs incurred.
In December, the group announced that it had purchased AutoZone Holdings for R278.5m. The acquisition represented a strategic shift to diversify revenue streams and gain access into new markets, Metair said.
Integration processes and the identification of synergistic opportunities are under way.
Metair said the capital restructuring is well on track and will be presented to the board and funders in March.
The group’s net debt (including Hesto and associated guarantees) amounts to about R4bn, most of which is classified as short term.
In addition to the R685m raised in July for the rebalancing of Hesto shareholder loans, additional short-term bridge facilities totalling R1.13bn were raised to redeem the preference share facility (R840m) and acquire AutoZone (R290m).
To address challenges facing Metair’s automotive component manufacturing businesses it will focus on operational efficiencies to reduce costs, strengthen its revenue base and improve margins for better returns on invested capital.
In SA, the group is working towards gaining market share by expanding product offerings and entering new sales channels.
“While we face short-term challenges related to volume decline and high debt levels, management has made significant progress regarding the stabilisation and turnaround strategy,” it said.
Hesto has shown strong recovery, and local operations such as Lumotech and FB contribute meaningfully to profitability.
To address market shifts and volume variability, rightsizing certain operations will be a priority in the 2025 financial year, Metair said.
The AutoZone acquisition will be a key strategic driver in terms of diversifying the group’s dependence on local OEMs and opening new sales channels.
The group’s primary segmental focus will move from automotive component manufacturing and energy storage to automotive component manufacturing and aftermarket automotive parts and services.
“We aim to expand in Sub-Saharan Africa’s mobility sectors through a ‘reset and growth’ strategy, creating long-term value and fostering sustainable mobility. This will involve optimising ebitda [earnings before interest, taxes, depreciation and amortisation], driving efficiencies and ensuring that leadership has the right capabilities to guide the company.
“The group is committed to positioning itself for the future by embracing technological advancements and strengthening relationships with OEMs, partners, and customers,” it said.
The group’s shares closed down 3.33% at R6.67 on Friday.
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