Barloworld’s Caterpillar equipment trading business in Russia is starting to feel the heat from international sanctions imposed on the country on the back of its invasion of Ukraine. This is evident in the group’s order book in the country, which, as at August 31, stood at $30-million, compared with the $94-million logged on March 31.

Barloworld is the official dealer of US brand Caterpillar in parts of Russia.

Speaking at a trading update briefing held at the end of September, Eurasia Equipment CE Quinton McGeer noted that the business was currently only able to sell SEM midtier equipment from China into Russia, as well as certain parts and used equipment, “if we can secure it”.

China-based SEM is a Caterpillar brand.

McGeer noted that Barloworld’s business in Russia only had access to between 50% and 60% of the parts it could sell before the sanctions were rolled out.

He added that the limitations imposed on product were what was “hurting us” the most, as all mining products had been sanctioned, with Barloworld a mining equipment specialist in Russia.

However, the good news was that the Russian business had become self-funded since February of this year.

Barloworld CEO Dominic Sewela said that Russia presented “a moving situation”, and that the JSE-listed company was continuously monitoring trading conditions.

The emphasis was on running a break-even business over the next couple of years, he added.

Achieving this meant implementing measures to reduce costs and right-size working capital in line with an expected revenue decline, while at the same time maintaining customer service.

That said, the Russia equipment business reported that revenue and operating profit were 6.3% ahead of the comparative period in US dollar terms for the 11 months to August 31.

In Mongolia, Sewela noted, trading over the first nine months of the financial year had been negatively impacted on by border closures and bottlenecks at Chinese ports, owing to Covid-19 measures implemented by the Chinese government.

These measures restricted products intended for mining customers from entering the country, and saw numerous mines suspend operations, owing to their inability to export commodities through China.

These restrictions had, however, since been lifted and products had started flowing through the borders at a more normalised rate.

Avis Spin-Out
Barloworld noted that preparatory work to structurally separate the group’s investment in its car rental and leasing business, Avis Budget Southern Africa, was “far advanced”.

The group said it had been evaluating the exit of Avis through either a sale, or an unbundling and separate listing.

To date, however, none of the proposals received from third parties interested in acquiring Avis had been “sufficiently accretive to shareholder value” to move ahead.

“Accordingly, the group continues to progress preparatory work for an unbundling and separate listing of Avis in parallel. “The group remains committed to its stated intention of separating the Avis business this calendar year.”