Diversified industrial multinational Barloworld says it continued to deliver a solid performance in the first quarter of the current financial year, 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 December 31, were further supported by sustainable cost management and healthy free cash flow generation by the group’s core operations, the company says.

“The group remains within its target debt and gearing levels remain well within our covenants, with net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) well below one times, with the group target being three times, while Ebitda interest cover exceeds eight times, with the group target being greater than three 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,” the company says in a trading statement.

DIVISIONAL PERFORMANCE
Barloworld notes that 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, the company says.

Mozambique, Zambia and Angola delivered exceptional revenue growth 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.

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

Meanwhile, Equipment Eurasia had a strong start to the financial year, supported by a strong performance in Russia. Despite the geopolitical 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, the company says.

Further, 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 December 31, 2021, Equipment Eurasia had a record firm order book supported by a diversified commodity mix, Barloworld says.

Meanwhile, Ingrain’s performance for the three months to December 31, 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-19 restrictions.

Additionally, 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, Barloworld says.

Further, the company's 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%, 600 basis points above the prior year, mainly owing to strong demand coupled with strict fleet management to minimise out-of-service fleet,” the company says.

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 2020 financial year, which was prior to the Covid-19 impacted period. The used vehicle market remains buoyant with strong margins, it adds.

Meanwhile, the Avis Fleet business continued to show resilience despite the ongoing market challenges, related to the diversity of the industries to which the business provides mobility solutions, 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. However, 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, the company adds.

Further, 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.