21 May 2003 21:52
China, Siberia feature in Barloworld's growth plans
China, Siberia feature in Barloworld's growth plans Group shows strong performance at the operational level, but
its headline earnings take a knock from the rand's strength BRAND management group Barloworld planned to build a
coatings factory in China, and was seeking a second Caterpillar franchise in Siberia to supply the diamond mining
region, CE Tony Phillips announced yesterday.
He said that this was part of the growth strategy of the group, which involved geographical expansion through its
tried and tested brands and activities.
Phillips was announcing interim results to March, which showed a strong performance at the operational level, but
headline earnings taking a knock from the strong rand. While operating profit for Barloworld rose 41% to R1,17bn in its
half-year results, the rand's strength knocked the group, with headline earnings a share dropping from 270c to 211c
as a result of a R308m exchange rate loss.
Phillips said the strength of the rand “masked” how well the group had performed.
UBS Warburg analyst Sean Meyersfeld said the results were pretty much in line with expectations at the operating
profit level, although currency fluctuations distorted the headline result.
Meyersfeld said that operationally the group was performing well, with earnings before interest and tax growing about
36% if currencies kept constant. That said, currency movements would continue to put rand earnings under pressure in the
second half.
He was concerned about the group's US operation, as it was looking increasingly likely that a turnaround in
trading conditions in that region might be further delayed. Despite this outlook, Meyersfeld said the group had done
well to curb the US losses reported in prior periods. Although revenue rose only 1% to R17,9bn, Barloworld's
operating margins had increased from 4,7% to 6,5%.
Sales of capital equipment in SA were buoyed by strong orders from the mining sector and the Coega project, while
Angola was becoming a highly promising market.
While Barloworld's order book for capital equipment dropped from just over R1,5bn in September to about R1bn in
March, Phillips was “comfortable” with this figure as it was still over a billion rand.
Phillips said that he expected there would be investment in a manufacturing plant for coatings in China in the next
year or so, probably with a local partner.
Meanwhile, he was seeking a Siberian franchise for Caterpillar east of Barloworld's existing franchise in
Siberia, to move into the diamond mining region “probably in the next 12 months”.
Phillips also suggested that there might be expansion possibilities in Europe for Hyster forklifts, and he said that
Barloworld had recently won a new Volkswagen dealership in Sydney. This was thanks in part to support from SA expatriate
managers in Volkswagen's Australian management.
Barloworld had boosted its stake in PPC to 67,4% and in Avis to 28,9%, but Phillips said that there were no immediate
plans to take out either company, despite the illiquidity of both stocks.
“When there is a willing seller for a block of shares, and we have the cash, we have a look,” he said. Barloworld
closed 10c down yesterday at R54 with 751381 shares traded in 729 deals.
[AIW [Asia Africa Intelligence Wire]] |
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