JSE-listed Barloworld has reported “pleasing results” in its core businesses in the industrial equipment and consumer industries verticals during the four months ended January 31.

In a voluntary trading update issued by the company on February 17, the company said it had, despite facing challenges in its Eurasia division, managed to achieve favourable group revenue growth thanks to a better trading performance in its Equipment business in Southern Africa and Mongolia and in its Ingrain unit.

The company also highlighted the successful unbundling and separate listing of its car rental and leasing business Zeda on the JSE on December 13 last year. As a result, Zeda's assets and liabilities have been deconsolidated from the group's financial statements from that date but its results have been consolidated into the group's numbers up to December 13.

The company said Barloworld Equipment Southern Africa delivered solid financial results for the four months to January 31. The company experienced strong turnover owing to high demand in the mining sector across all its regions. Machine sales growth was “exceptional”, with an equally solid performance being reported in aftersales.

However, the company said the operating margin was tracking slightly lower than the comparative prior period owing to the strong machine sales mix. The business has increased investment in working capital in preparation for planned deliveries in the second half of the financial year ending September 30.

The Congo-Brazzaville joint venture Bartrac continued to show a resilient performance and posted profits for the period, the company added. The company expected the business to maintain the same trajectory for the remainder of the financial year.

Barloworld Equipment Eurasia also reported a strong start to the 2023 financial year, supported by a better-than-expected result in Russia and a good performance in Mongolia.

Despite the war in Ukraine affecting the business in Russia, the company said the results were significantly better than expected owing to sales from available prime product inventories at the start of the financial year and a reasonable parts supply.

Barloworld said that the business had made good progress in restructuring the cost base in line with existing trading levels, while managing risks and exposures in an ever-changing regulatory environment.

In Mongolia, the business experienced a good start with good prime product sales compared to the prior period, supported by the continued positive impact of the opening of the China borders. This improved the free flow of products and commodities in the region, the company said, adding that the aftermarket demand remained solid and, as a result, the business managed to record a good operating result during the period.

The businesses in both countries reportedly generated solid operating margins.

In Barloworld’s consumer industries business, Ingrain showed strong revenue growth against the prior period, with earnings before interest, taxes, depreciation and amortisation being at similar levels. Sales volumes were relatively flat year-on-year, with growth in export volumes offset by marginally lower domestic sales volumes.

The alcoholic beverages and coffee creamer sectors saw a reduction in demand on the back of prevailing economic pressure on the South African consumer.

Notwithstanding this, the confectionary sector remained resilient and showed satisfactory volume growth year-on-year. Export sales were ahead of the prior period. The demand in export markets is expected to continue to offset the lower domestic volumes, the company said.

Gross margins in this business unit were slightly lower than the prior period owing to increased agricultural commodity prices, global input price increases and the effects of a weaker rand. Meanwhile, operating margins were also lower because of increased investment in plant maintenance and critical skills in the business.

Barloworld has purposefully allocated capital by investing cash in projects that aim to yield returns higher than the cost of capital, distributing cash to shareholders and paying down debt to maximise shareholder value.

Total ordinary and special dividends amounting to R1.6-billion were paid to shareholders in January. The group said it had reviewed its current facilities and remained satisfied with the positive state of the headroom, gearing and liquidity.