Barloworld Limited (JSE:BAW) News - CEO’s AGM statement and voluntary trading update for the first quarter to 31 December 2021

Barloworld Limited
(Incorporated in the Republic of South Africa)
(Registration number 1918/000095/06)
(Income Tax Registration number 9000/051/71/5)
(Share code: BAW)
(JSE ISIN: ZAE000026639)
(Share code: BAWP)
(Bond issuer code: BIBAW)
(JSE ISIN: ZAE000026647)
(Namibian Stock Exchange share code: BWL)
("Barloworld” or the “company" or the “group”)

CEO’s AGM STATEMENT AND VOLUNTARY TRADING UPDATE FOR THE FIRST QUARTER TO 31 DECEMBER
2021

Overview

The group continued to deliver a solid performance in the first quarter of the financial year. The first quarter was 
bolstered by favourable results in December, particularly in the Equipment southern Africa and the Car Rental and Leasing
businesses. The results for the three months ending 31 December 2021 were further supported by sustainable cost
management and healthy free cash flow generation by the group’s core operations.


Operational Review for the first quarter to 31 December 2021

Industrial Equipment and Services
Equipment southern Africa
Equipment southern Africa continues to perform well in what remains an uncertain operating environment. Underlying
activity remains strong with an increased firm back order. However, the supply chain disruptions resulted in the delayed
delivery of large mining package deals. Mozambique, Zambia, and Angola delivered exceptional revenue growth, this
was on the back of bullish coal, copper and oil prices. The significant growth in these three countries was offset by slow
deliveries in South Africa and Botswana. Operating margin is tracking above the comparable period in the prior financial
year, driven by well-controlled expenses.

The Bartrac joint venture in the Democratic Republic of Congo delivered strong results, contributing a positive share of
associate profits.

Equipment Eurasia
Equipment Eurasia had a strong start to the financial year, supported by a strong performance in Russia. Despite the
geo-political tensions in the region, business at operational level has not been impacted. The business is generating
record results capitalising on the current mining boom. The group continues to monitor the environment.
Mongolia experienced reduced machine volumes, however the region still managed to record a good result at the
operating margin level.
It is also pleasing to note that at 31 December 2021, Equipment Eurasia had a record firm order book supported by a
diversified commodity mix.


Consumer Industries
Ingrain
Ingrain’s performance for the three months to 31 December 2021 reflects higher sales volumes and benefits will accrue
from the first year of a full 12-month period in Barloworld’s financials in this financial period.

The increased export sales volumes during the period were despite the restricted availability of food-grade containers
and shipping space from South African ports, with good recovery in demand from the regional markets following the
prior period Covid restrictions.

                                                                                                                           
There has been an improvement in the sales of powdered glucose and modified starches during the period, as
investments in plant and maintenance initiatives start to yield results. Contribution margins continue to receive support
from the current differentials between local and international maize prices. SAFEX maize prices are trading closer to
export parity levels, with favourable predictions for the current season on the back of the second-largest maize crop of
16,234 million tons harvested for the 2020/21 season. International maize prices continue to trade higher, spurred by
increased demand from China, causing South African maize prices to rise on the back of higher USD pricing and a
weaker currency.

Automotive
Car Rental
The Car Rental business continues its recovery trajectory, with the rebound of domestic travel and uptake of subscription
offerings in the first quarter resulting in an improvement on trading volume at an average 67.5% of 2019 levels.
Fleet utilisation breached the 80% mark at an average of 81% (600bps above the prior year) mainly due to strong
demand coupled with strict fleet management to minimise out of service fleet.
The supply chain constraints remain a limitation to improved recovery of the mobility industry. Despite this, the business
continues to deliver solid earnings, which are even higher than the first quarter of FY2020 (pre-Covid).
The used vehicle market remains buoyant with strong margins.


Avis Fleet
The Avis Fleet business continued to show resilience despite the ongoing market challenges, related to the diversity of
the industries which the business provides mobility solutions to, coupled with rigid contract management capability.
Increased corporate activity can be seen in the firm order book and the number of renewed facility approvals that are in
the system. The global fleet shortage, and the slow new vehicle production, remain a restraint to order delivery.
Used vehicle margins continue to benefit from the integration with the Car Rental operation, leveraging infrastructure
and systems. Management’s strategy of diversifying the portfolio and capabilities into medium and heavy commercial
fleets is yielding good results.


Discontinued operations
Logistics
The process to exit the Logistics business through a piecemeal disposal of various sections, in response to high levels
of interest in the niche market-leading specialised business units, is substantially advanced.
Focus remains on transactions that continue to support our customer requirements and protect value for the group. The
group has concluded the sale of its 51% controlling interest in Aspen Logistics on 30 November 2021 and also entered
into a sale agreement for the shares it owns in subsidiaries which own Manline Energy, Manline Freight, and Timber
24. This transaction remains subject to approval from the Competition Commission of South Africa. Together with the
sale of Aspen Logistics, these transactions when concluded will finalise the group’s exit from the bulk of its assets within
the Transport business. The remainder of the business within Transport are made up of dedicated customer contracts,
which are in the process of being exited from in an orderly manner and / or transferred to parties nominated by the
customer; and this process is well advanced.
As part of the piecemeal disposal process underway, the group remains in discussions with several interested parties
in relation to the sale of its shareholding in the Supply Chain Solutions (SCS) business. The company will provide an
update on the progress on this transaction in due course.


Funding and cash preservation
The group remains within its target debt and gearing levels remain well within our covenants, with net debt to EBITDA
well below 1.0 times (group target is  3.0
times). We have reviewed our current facilities, including committed and non-committed facilities, as well as headroom
on the existing medium-term note programme and remain satisfied with the positive state of our headroom, gearing and
liquidity.


Conclusion
Management will release a pre-close trading update prior to close period for the interim results to 31 March 2022. We
expect to release our interim financial results on or about Monday, 23 May 2022.

                                                                                                                          
The information contained in this announcement has not been reviewed or reported on by Barloworld’s auditors.

Johannesburg
10 February 2022

Equity and Debt Sponsor:
Nedbank Corporate and Investment Banking, a division of Nedbank Limited

Enquiries:
Nwabisa Piki
Group Investor Relations
Tel: +27 11 445 1819
E-mail: nwabisap@barloworld.com




                                                                                                                

Date: 10-02-2022 02:18:00
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