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Mining equipment market recovery expected from 2016 onwards – Barloworld

Barloworld CE Clive Thomson

Barloworld CE Clive Thomson

Photo by Duane Daws

17th November 2014

By: Leandi Kolver

Creamer Media Deputy Editor

  

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Although the mining environment was expected to remain tough in 2015, JSE-listed Barloworld expected to see a recovery in terms of mining equipment deliveries from the 2016 financial year onwards, CE Clive Thomson said on Monday.

Speaking at a presentation of the company’s results for the year ended September 30, he noted that Barloword saw future mining opportunities in a range of geographical locations and across various commodities.

Further, while underground mining equipment currently only made up a small part of Barloworld’s overall equipment mix, it was an area the company was targeting for significant growth over the next three to five years, he pointed out.

“There are a number of projects that are prevalent across the Southern African region and, should we get the right product with the right focus on the market, we do believe that this is something that will underpin our mining revenue in the years ahead,” Thomson said.

He also identified the power sector as representing a significant medium-term growth opportunity for Barloworld, with the company having a strong project pipeline.

Major power opportunities identified by Barloworld included a Mozambican liquefied natural gas plant, the Sonaref refinery, in Angola, and a recently awarded contract to supply State-owned freight group Transnet with engines for eight new tug vessels.

The Transnet contract was expected to generate $17.5-million in revenue over a three-year period, with a further $14.6-million that could potentially be derived from after-sales.

Thomson added that Transnet was also expected to issue a new tender for a further five vessels shortly.

Other power opportunities identified by Barloworld included the Power of Siberia pipeline project, international oil and gas engineering, procurement and construction projects and industrial and rail projects.

FINANCIAL PERFORMANCE
Meanwhile, Barloworld FD Don Wilson said the company had delivered a solid performance in the year ended September 30, with headline earnings a share from continuing operations having increased by 10% to 857c.

Barloworld’s operating profit increased by 16% to R3.83-billion, while revenue was up 4% to R62.1-billion, reflecting improvements in operating efficiencies and disciplined cost control as the operating margin increased from 5.6% to 6.2%.

However, while the company’s Southern Africa business performed well during the year under review, the construction sector in Spain remained depressed and necessitated a further restructuring of Barloworld’s operations.

During the financial year, the Southern African equipment division increased its revenue by 9.3%, contributing 20.9-billion to Barloworld’s group revenue of R62.1-billion.

The division also increased its operating profit by 17.3% to R1.96-billion and expanded its operating margin.

Meanwhile, Barloworld had incurred restructuring costs of €6.2-million in Spain; however, the restructuring was expected to generate savings of €7.4-million in the 2015 financial year.

Thomson added that the company’s Russian business delivered a pleasing result, notwithstanding the uncertainties emanating from the Ukraine crisis.

During the year under review, the Russian business grew its operating profit by 5% to R429-million, with the operating margin having increased to 10.7% from 8.8% previously.

Currently, 60% of the Russian business’ new equipment was sold to the mining industry; however, Thomson said the power sector, which accounted for 10% of new equipment sales, would present further growth opportunities in coming years.

Meanwhile, Barloworld’s automotive and logistics division had traded strongly as a result of improved operating efficiencies and disciplined cost control.

During the financial year, the division earned revenue of R31.1-billion, up 8.1% on the R28.8-billion earned in the prior financial year, while operating profit also increased by 24% to R1.64-billion.

Wilson, meanwhile, noted that Barloworld had R8.4-billion in unused bank facilities as at September 30, in addition to R4.16-billion in cash and cash equivalents.

“Therefore, we are well placed to fund growth in the business,” he said.

“While a number of geopolitical risks and economic uncertainties exist globally, our focus will remain on executing our strategy, driving operational efficiencies and maintaining strong cash flows,” Thomson said, adding that the company expected to continue making good progress in 2015.

“[Barloworld is] well placed to benefit once the infrastructure and mining cycles move into a recovery phase across our key geographies,” he added.

Barloword declared a dividend of 320c for the year, up 10% on the dividend of 291c paid out in 2013.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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