Barloworld reports 10% revenue decline as its takeover goes into implementation phase

Barloworld said revenue from its heavy equipment and starch and glucose sales fell by 10% to R33.6 billion in the 11 months to August 31.

The group, which is scheduled to delist from the JSE following a takeover by a consortium comprising Saudi Arabia-based Zahid Group, Barloworld CEO Dominic Sewela and staff, said in an operational update on Thursday that earnings before interest, tax, depreciation, and amortisation (EBITDA) is expected to decline by 9% to R3.8 billion over the period.

The share price increased by 1.7% to R119.51 on the JSE Thursday morning, well up from R85.05 a year before. The takeover offer per share is R120 in cash, with a total value unlock of R123.10 per share when considering a R3.10 declared dividend. The extended takeover long-stop date is December 11, 2025, pending some regulatory approvals.

The Equipment Southern Africa division generated R21.8 billion in revenue, 3.9% lower than the prior period at R22.7 billion, the operational update said on Thursday. Excluding the impact of the stronger rand against the dollar, revenue declined by 1.5%.

Revenue was driven by strong rental growth and some gains in machine sales, while aftersales revenue fell compared to the previous year.

The sales mix had a dilutive impact on profit margins. EBITDA ended at R2.3bn, down from R2.7bn in the prior period. The EBITDA margin declined to 10.7% from 11.8%.

Bartrac's performance from Caterpillar sales in the Democratic Republic of Congo improved from the first half and positively contributed R116 million to bottom line performance. Equipment Southern Africa's order book increased to R3.2bn from R2.4bn.

At Barloworld Mongolia, business tapered off following the delivery of a large order of new machines. This was partly offset by aftermarket growth. As a result, revenue fell by 8.5% to $216m.

Barloworld Mongolia generated EBITDA of $45.8m compared to the prior period’s $44.3m. The EBITDA margin improved to 21.2% from 18.8% in the previous period.

The prior period included the $10m earnout triggered by the Barloworld Mongolia acquisition performance conditions. The firm order book declined to $14.2m from $76.8m.

Meanwhile, in Russia, Vostochnaya Technica's (VT) revenue fell 54% to $95.2m. Consequently, VT's EBITDA declined by 22.5% to $10.1m. The EBITDA margin improved to 10.7% compared to 6.3% in the prior period.

Barloworld’s management said the business continues to trade above break-even and remains self-sufficient in terms of its funding requirements.

In the Consumer Industries division, Ingrain glucose and starch operations held up well in a difficult domestic market. Revenue of R5.8bn was 2.1% lower due to lower volumes, partially offset by higher selling prices, increasing competition from imports, and subdued demand in certain segments.

Manufacturing costs increased due to cyclically higher maize prices, and increasing energy and chemicals resulted in EBITDA falling by 9.9% to R635m.

The group maintained adequate headroom for the current period on both offshore and onshore operations. During the current period, net debt of R5.4bn was R1.9bn higher than the prior period of R3.5bn.

BUSINESS REPORT