Barloworld’s cash holdings in Russia surge to R1.2bn as it grows SA revenues

Equipment southern Africa had another stellar performance, achieving double digit growth of 35%. Photo: Supplied

Equipment southern Africa had another stellar performance, achieving double digit growth of 35%. Photo: Supplied

Published Nov 21, 2023


Barloworld, whose cash holdings in sanctions-hit Russia have more than doubled to R1.2 billion, lifted per share headline earnings from continuing operations for the full year to the end of September by 5.5% to 1156.3 cents on the back of a 14% surge in revenues.

However, after accounting for disposed entities, group headline earnings per share in Barloworld for the same period softened by 27% to 1291.4c.

Shares in the company on the JSE were marginally lower by 0.55% at R77.68 in afternoon trade yesterday and are 8.81% lower in the past six months. Businesses with operations in Russia have been dented by negative sentiment as sanctions from Western countries mounted as a result of the country’s invasion of and war in Ukraine.

For Barloworld, there has been an uptake in cash held in Russia and it explained that uncertainty pervades “the extent to which our Russian operations will be impacted” although this was “not expected to affect the going concern” status of the group

Barloworld intends to use the cash it holds in Russia to boost its operations there.

“At 30 September 2023, cash held in Russia was R1.241 million (2022: R419m). This cash will be utilised for operational purposes to settle liabilities,” Barloworld said on Monday.

It added: “The environment in Russia remains fluid, and the activity and profitability of Equipment Eurasia are expected to continue to significantly reduce from the sanctions imposed due to the ongoing Russia/Ukraine war.”

In the full year period under review, the company raised revenues from continuing operations by 14% to R45bn, with it’s the operating profit from core trading activities rising 19% to R4.3bn.

“Equipment southern Africa had another stellar performance, achieving double-digit growth of 35%. This was mainly driven by robust machine sales growth and after-sales revenue growth,” said group chief executive Dominic Sewela.

Higher sales volumes during the period have been attributed to “favourable mining production and fleet replacements” across the industry. Barloworld’s equipment Eurasia also had a stronger out-turn, “supported by an excellent performance in Mongolia” but offset by revenue reduction in Equipment Russia.

Equipment Mongolia’s revenue for the current year surged by 59% due to strong mining activity and improved prime product sales and aftermarket revenue compared to the prior year.

The Ingrain unit experienced an increase in revenue of 11%, supported by growth in exported starch volumes and favourable exchange rates despite South African consumers being under pressure with shrinking disposable incomes.

The higher revenue generation pushed up its operating profit margin 9.6% leading to a final dividend payout of 300c per share, bringing up the total dividend for the full year to 500c per share compared to the 460c per share paid out in the previous period.

Barloworld disposed of two groups out of the Logistics business in 2021 and 2022, a period in which it also unbundled the car rental and leasing business Zeda Ltd as well as the remaining portion of Logistics. Earlier this year, Barloworld disposed of its 51% investment in Crownmill Trading Proprietary Ltd for R15m.

In September, Barloworld said it’s South African short-term debt includes bonds maturing in the next 12 months amounting to R1.5 billion, term debt of R572m and other uncommitted facilities amounting to R500m.

“As part of the ongoing process to reduce finance costs through the renegotiation of the current facilities, Barloworld repaid R400m of the short-term bank debt in July 2023. We expect to maintain our participation in the bond market to the extent that we can achieve funding rates that are competitive,” it said at the time.

Yesterday, it said it had issued a three-year and five-year debt instrument of R1bn last month as part of the refinancing of the instruments that matured in the same month. In December last year, Barloworld bonds amounting to R252m while earlier this year it extinguished as much as R700m in debt.

Under its equipment business for the southern Africa region, Barloworld delivered “strong results while navigating challenging” macro factors. Machine sales, after-sales and machine rentals for the region attained similar growth momentum since the interim period in March 2023.