JSE-listed distributor Barloworld on Monday reported an 18% increase in revenue, to R58.6-billion, for the year ended September 30, with operating profit up 31%, to R2.98-billion, compared with the previous financial year.
However, warned CEO Clive Thomson, the going was about to get tougher as the Caterpillar distributor was facing “a challenging mining environment”, owing to a slowdown in Chinese growth, a subsequent softening in commodity prices, as well as uncertainty in the South African mining industry.
He noted that Barloworld’s mining deliveries would likely be lower than the record levels seen in 2012, as some mining groups were deferring capital expenditure.
“We have seen signs of a slowdown, especially on the contract mining side. There will be some slowdown – the question is to what degree and how quickly the commodity cycle will come back.”
While noting that the high number of capital equipment deliveries in the past financial year came as somewhat of a surprise to Barloworld, Thomson said the numbers reported on Monday were based on orders placed 12 months ago.
Since then, he added, the group had seen a “pullback in its order book”.
However, Thomson also noted that there was a substantial capital equipment population active in the mining industry and elsewhere that required maintenance and which would, therefore, serve as an continuous income stream to the group.
One factor that saved Barloworld from reporting a big fall in its order book on Monday was the acquisition of the distribution businesses of Bucyrus Africa and Eqstra Mining Services in Southern Africa for R1.38-billion, which provided the company “with the most extensive range of surface and underground mining products in the industry”, noted Thomson.
Barloworld had also since signed for the acquisition of the Bucyrus distribution and support business in Russia at a price tag of R436-million, and expected the transaction to close December 3.
Barloworld’s Southern African Caterpillar order book at September 30, 2011, was R5.2-billion, compared with R5.3-billion in September 2012. However, without the new Bucyrus business this would have been R3.9-billion.
New equipment orders for Barloworld in Southern Africa included machinery worth around R1-billion for First Quantum Minerals, in Zambia. This order included three electric rope shovels and seven rotary blast-hole drills.
Business By Business
Looking at the equipment division within Barloworld, revenue in the Southern African equipment business for the year ended September 30 was R16.3-billion, which was 30% ahead of last year, which, in turn, was 50% up on the 2010 level. Deliveries of large mining equipment units increased by 19%.
Operating profit stood at R1.5-billion, up from R1.2-billion in the 2011 financial year.
South Africa continued to be the major source of revenue for the region (64% of total), followed by Zambia, Botswana, Mozambique and Angola.
In the Russian equipment business, profit reached R344-million, while the troubled Europe zone remained Barloworld’s problem child, recording a loss of R139-million.
Barloworld’s automotive and logistics division recorded a 26% increase in operating profit to R1.15-billion. Rental days at Avis grew 11%, with new vehicle sales for the calendar year to September up around 10%.
The group’s handling division recorded an operating profit of R38-million, down from R72-million in the previous financial year.