In an operational update to shareholders for the six months ended June 30, JSE-listed Metair Investments has said its business verticals demonstrated resilience despite the challenging operating and trading conditions.

The company said on September 5 that it had successfully maintained a constant supply to customers during the six-month period.

Metair has faced challenges in the economies and markets in which it operates of late, including high interest rates, inflation and continued supply chain and port disruptions.

Despite these difficulties, the company said it had remained focussed on maintaining stability and operational profitability at Hesto Harnesses; improving the operating performance of Mutlu Akü in Türkiye; and formulating a debt restructuring plan to address high debt levels.

Additionally, Metair said it had focused on ensuring leadership stability by appointing a human resources executive to drive a human capital strategy.

The company said it had successfully managed to mitigate the impact of lower customer demand and volume variability from South African original-equipment manufacturers (OEMs).

Total automotive battery units sold in Metair’s energy storage business increased by 10% to 3.9-million units, up from 3.6-million sold in the first six months of 2023. This improvement was driven by stronger aftermarket and export sales, the company said.

However, South African OEM vehicle production volumes declined by 8%, with production decreasing from about 292 000 vehicles in the first half of 2023 to about 270 000 in the period under review. Normal production is expected to resume in the fourth quarter, the company said.

Metair noted that borrowing costs increased owing to higher net debt levels and extreme interest rates in Türkiye. Nonetheless, Metair’s core automotive subsidiaries, including Lumotech, Supreme Springs and Smiths Manufacturing, managed to navigate the impact of lower customer demand, the company said.

Metair said Hesto continued to make progress in line with expectations, with Ford volumes supporting revenue and operating profit. Management said it remained focused on production efficiencies and cost reductions.

In Türkiye, inflation peaked at 71.6% and interest rates increased to 50%, causing financial volatility. Despite these challenges, Mutlu Akü saw automotive sales volumes increase to 1.8-million batteries in the first half, compared to 1.76-million in the same period a year prior.

Metair's Romanian subsidiary Rombat reported a 41% increase in automotive battery volumes, rising to 1.3-million units. First Battery in South Africa, however, faced a decline in sales owing to reduced demand from local OEMs and a price-sensitive retail environment.

Metair’s debt-to-equity ratio remained high owing to increased working capital, startup funding, and the impact of hyperinflation. However, the company is still operating within agreed bank covenant levels. A debt restructuring plan has been formulated and approved by the board, with a focus on refinancing South African operations, rebalancing Hesto's debt, and derisking from Türkiye.

Metair noted that the European Commission had raised concerns regarding potential violations of EU antitrust rules by battery manufacturers, including Rombat.

A reply to the European Commission's Statement of Objections was submitted in April and oral hearings were conducted in July. As no ruling had yet been made, a reliable estimate of any potential fine could not be determined at this stage, the company said.

Looking ahead, Metair said it expected continued competition in the South African market, but aimed to increase market share and profitability.

The company said it anticipated growth in its energy storage business in the second half owing to winter demand cycles in European and export markets.

Metair management would remain focused on stabilising major projects and improving profitability while addressing challenges in Türkiye, including the devaluation of the Turkish lira and high interest rates.

Metair’s audited interim results for the six months to June 30 are expected to be published on September 26.