Barloworld operating profit up by 31%

The industrial group's equipment businesses in southern Africa and Russia saw record deliveries to mining operations, while its automotive and logistics unit achieved strong results in all segments.

"We are very happy - it has generally been a good year across most fronts for us," chief executive Clive Thomson said atthe presentation.

He also said the group had concluded a number of important strategic transactions, the most significant of which was the acquisition from Caterpillar of its Bucyrus distribution businesses in Southern Africa for R1.4bn.

Last year, the US company bought US-based mining machinery group Bucyrus for nearly 9bn. Thomson said this had provided Barloworld with the most complete mining equipment product range in the industry.

Barloworld distributes a number of major international brands, including Caterpillar heavy earth-moving equipment, and provides an integrated rental, fleet management, product support and logistics business.

It also had car rental, motor retail, fleet services, used vehicles and materials handling and agriculture operations. The group finalised the disposals of its materials handling businesses in the US and UK for R1.1bn. It said it would redeploy the capital into higher-return opportunities.

"Barloworld reported a 53% increase in net income on the back of an 18% increase in sales revenue," Abdul Davids, head of research at Kagiso Asset Management, said.

"The South African mining order book declined to R3.9bn, excluding Bucyrus, (but) when including the legacy products in South Africa for Bucyrus the order book stands at R5.3bn," he said.

Barloworld's Russian order book for heavy equipment was up on last year and it would further benefit from its R435m acquisition of Bucyrus' sales and support business there. However, its Iberian markets had slipped back into recession.

"This does not bode well for future revenue growth," Davids said.

He said the outlook given by management was for lower South African heavy equipment revenue but that should be mitigated by Bucyrus legacy sales.

He also said management had forecast single-digit growth in South African vehicle sales, due to tepid economic growth, inflationary conditions and a weaker rand, which would probably hit consumer demand for vehicles next year.

Source: Business Day via I-Net Bridge