JSE-listed automotive components supplier Metair has reported that group revenue for the six months ended June 30, is expected to increase by between 52% and 54%, compared with the revenue of R5.67-billion reported for the half-year to June 30, 2024, largely driven by the inclusion of Hesto Harnesses as a subsidiary from April 1, this year, and AutoZone, which was acquired in December 2024.

Group earnings before interest and taxes (Ebit) are expected to increase by between 24% and 30% to between R440-million to R460-million, compared with Ebit of R354-million in the half-year to June 2024. The overall Ebit margin for the interim period under review is expected to be between 5.1% and 5.3%.

Ebit was positively impacted on by various recovery initiatives, stronger volumes and the inclusion of Hesto for three months from April 1. This was offset by the inclusion of anticipated losses at AutoZone for the period, which is still in a recovery phase as it emerges from business rescue, Metair says.

Further, Metair continues to successfully implement measures to restructure, rightsize and close certain operations, which has enabled it to address market shifts and volume variability, the company adds.

The focus for the current period has been on manufacturing excellence in delivering to Metair’s original equipment manufacturer (OEM) customers, as well as bedding down the newly-acquired AutoZone business to enable growth in the Aftermarket Parts and Retail segment, the group notes.

Despite some market headwinds, it is encouraging that volumes at key South African OEM customers have stabilised and remain in line with forecasts for the current period. The continued improvement initiatives at Hesto, the group’s major wiring harness supplier, resulted in higher revenue and improved operating profit.

“Building on the progress we achieved in 2024, the group’s manufacturing and production have been further optimised and our stringent focus on efficient project management and operational improvements has resulted in a more flexible operating model, ensuring that the business can deliver optimally to its customers,” says Metair CEO Paul O’Flaherty.

“Further, and while there is an obvious indirect impact on the South African local economy, it is pleasing that we do not expect the tariff turmoil to have a direct impact on our OEM customers, as these customers do not supply into the US market.”

Consumer demand in the aftermarket sector remains subdued and, as expected and communicated at the time of its acquisition in 2024, AutoZone is currently in a stabilisation phase consistent with expectations.

Encouragingly, the integration process is already delivering synergies across Metair’s automotive aftermarket and distribution operations.

“This acquisition has strengthened our strategic positioning in the aftermarket sectors and provides a robust platform for future growth. We expect AutoZone will become a meaningful contributor to group earnings by 2026,” O’Flaherty adds.

Further, in Metair's OEM segment, total local market vehicle production increased by about 4% year-on-year to an estimated 282 000 vehicles for the six-month period under review, from about 270 000 vehicles in the prior comparable period.

Metair's OEM revenue for the first half of the 2025 financial year is expected to increase by between 65% and 70%, up from R3.29-billion in the half-year to end June 2024, with Ebit margins expected to improve to between 6.5% and 7.5%, compared with a margin of 6% in the first half of the 2024 financial year.

This growth is primarily driven by increased volumes supplied to key OEM customers relative to the prior period, in line with expectations, and the inclusion of Hesto as a subsidiary.

Additionally, if Hesto had been included for the full six months in both comparative periods, OEM revenue would have increased by between 7% and 9% compared with the half-year to June 2024, and Ebit margins by between 6% and 7%, while the Ebit margin for the half-year to June 2024 was 5%.

Meanwhile, revenue from Metair’s Aftermarket Parts and Retail (AFM) segment is expected to increase by between 32% and 35%, up from R2.39-billion in the half-year period in 2024, primarily owing to the inclusion of AutoZone.

Further, Ebit margins in this segment are expected to decline to between 3.6% and 3.8%, down from 7.3% in the half-year to end June 2024.

This is owing to the expected current period Ebit loss recorded by AutoZone and the Ebit margins at First Battery returning to normalised levels of between 8% and 9%, compared with the one-off higher margin of 14% in the interim period to end June 2024, the company notes.

If AutoZone were excluded for the current period, then Ebit margins for this segment would be expected to be between 6% and 7%, which is in line with forecasts.

Also in the AFM segment, First Battery South Africa's sales volumes declined slightly in the first-half of this year, with about 770 000 batteries sold, compared with the 786 000 sold in the prior comparable period.

Additionally, at Rombat, in Romania, volumes sold improved by 6% to 1.43-million batteries, up from 1.35-million in the half-year to end June 2024, supported by an improvement in both local aftermarket and OEM sales.

Meanwhile, in terms of guidance for total group earnings, including discontinued operations, Metair forecasts headline earnings per share (HEPS) of between 63c and 67c, compared with a headline loss a share of 3c in the prior comparable period.

It also forecasts a loss a share of between 90c and 95c, compared with a loss a share of 3c in the half-year to end June 2024, primarily owing to the one-off net capital loss of about R300-million relating to accounting for Hesto as a subsidiary.

Further, in terms of group earnings from continuing operations, Metair expects to report HEPS of between 69c and 72c, which is a decrease of between 6% and 10%, compared with the HEPS for the half-year to end June 2024 of 77c; and a loss a share of between 80c and 90c, compared with earnings a share of 77c in the half-year to end June 2024, primarily owing to the one-off net capital loss noted previously.

“We are pleased with the progress in the past six months, where there has been a marked recovery in volumes and improvement in margins on the back of the restructuring and optimisation efforts of the group.

“The improvement in Hesto’s performance is now well entrenched, and the initiatives to stabilise AutoZone are bearing fruit. Furthermore, the restructured debt package has provided the Group with a sustainable platform from which to further reduce debt,” O’Flaherty says.