The share price of JSE-listed energy storage and automotive components company Metair rose by more than 26% on March 11, after the company announced that it expected to report earnings a share of 44c to 53c and headline earnings a share of 128c to 140c for the 2023 financial year.

This compares with the loss a share of 21c and the headline loss a share of 17c reported for the 2022 financial year.

In a trading statement, the company said it was likely to report double-digit revenue growth and an earnings before interest and taxes (Ebit) margin of about 3%.

Excluding the impact of hyperinflation and impairments, the Ebit margin, which is calculated as operating profit before interest and taxes, is expected to be between 6.8% and 7.8% for the year, compared with 7.6% in the prior financial year.

South African original equipment manufacturer production volumes for the year grew by 20% from 2022, improving top line growth in the group's automotive components business.

However, automotive battery volumes sold in the group's energy storage vertical declined by 17% to 7.3-million units from 8.7-million in 2022, mainly owing to the loss of export volumes primarily in Mutlu Akü, in Türkiye.

Further, Metair's borrowing costs increased owing to higher net debt levels to support customer expansion, higher working capital investments and the effect of hyperinflation in Türkiye. Net finance costs increased by more than 90% from R377-million in the prior year.

"Management's efforts were largely focused on the two key businesses that most significantly impact liquidity, operations and results. This includes recovery of the wiring business at the group's managed associate Hesto Harnesses following the significant losses incurred in the first half of the 2023 financial year, as well as stabilising Mutlu Akü, in Türkiye."

In terms of Hesto's performance, Ford volumes have progressed in line with expectations. Close collaboration between Ford and Metair's technology partner led to an agreement for a commercial price adjustment, providing significant support to revenue and operating profit over the remaining model life of nine years.

As a result, Hesto generated an operating profit before interest and taxes in the second half of the 2023 financial year.

"Owing to the significant losses in the first half, Hesto will still be in a loss-making position as at the end of the 2023 financial year. Hesto's revenue increased by approximately 200% from the R1.8-billion in the prior financial year," Metair said.

Mutlu Akü had imposed self-sanction protocols to terminate export sales to Russia in line with European Union sanctions regulations imposed on Russia.

This, combined with cancellations from a key customer in the US, decreased export volumes by 69% from 1.7-million units in the prior year to 500 000 units in the year under review.

Total Mutlu Akü automotive sales volumes decreased to 3.3-million batteries, down from 4.9-million batteries in the 2022 financial year, of which local aftermarket sales decreased to one-million units, down from the 1.6-million units in the preceding year.

"Over the financial year, Türkiye interest rates increased to 42.5% and annual inflation peaked at 65%, contributing to a significant rise in interest costs for the group. To further mitigate against the increased financial volatility, Metair continues to pursue de-risking options for this business."

Meanwhile, the companies in the automotive components vertical, namely lighting company Lumotech, suspension company Supreme Springs and heating, ventilation and cooling company Smiths Manufacturing, performed well, although short-term margin dilution was experienced owing to customer volume variability, loadshedding and supply disruptions.

The automotive components vertical experienced strong revenue growth of about 45% compared with the prior financial year, and Ebit margins of between 7% and 7.5% are expected, compared with the 7.4% Ebit margin in the 2022 financial year.

Additionally, owing to the challenges experienced in Türkiye, Metair's energy storage vertical's revenue is expected to be flat against the prior financial year, with pre-hyperinflation Ebit margin, before impairments, expected to be between 8.5% and 9.5%, compared with 9% in the prior year, supported by the South African battery business.

On a post-hyperinflationary basis, energy storage vertical Ebit margins are about 3%, up from 2.3% in 2022.

The group's debt-to-equity ratio is higher than historic levels owing to increased working capital, start-up funding for new projects and the impact of hyperinflation on Mutlu Akü, but remains within bank covenant levels.

"Management is closely monitoring debt levels and liquidity, with a priority to reduce these in a responsible manner. In addition, the group is implementing a range of strategies to reduce and restructure debt levels, including effective cash management and cost control, delaying non-critical capital expenditures and engaging customers for flexible support on capital investments for new models," the company said.

Metair expects to publish its results on or about March 27.

The company’s share price on the JSE rose to R12.50 early on March 11 – an increase of more than 26% when compared with the March 8 close of R9.86. By 12:40, the company’s shares were still up more than 22%, at R12.08.