Metair’s share price shot up more than 20% yesterday morning after its board forecast a turnaround in earnings in the 2023 year from a loss a year before.
It said in a trading statement that it expected to report headline earnings a share of between 128 cents and 140c in the 12 months to end-December 2023 compared with a 17c headline loss the previous year.
It also announced that its auto component-making managed associate, Hesto Harnesses, which is participating as a supplier in a multibillion model manufacturing expansion at Ford in South Africa, had increased revenue by about 200% in 2023 following an agreement it had reached with Ford for a commercial price adjustment over the remaining nine years of the new Ranger model life
The share price was trading 22.76% higher at R12.10 on Monday morning. The price has fallen markedly from R22.76 a year ago.
Metair directors said trading conditions were challenging, however, due to high interest and inflation rates where the group operated.
In South Africa, supply chain disruptions, made worse by the deterioration in rail and port infrastructure, created delays and drove increased costs due to having to resort to emergency airfreight.
To mitigate this, higher levels of stock were maintained to support original equipment manufacturers (OEMs) that often varied their production volumes.
Also, geopolitical tensions and adverse economic policies in Türkiye and Europe impacted the international battery businesses.
In Türkiye, battery manufacturer Mutlu Akü’s automotive sales volumes fell to 3.3 million batteries in 2023 from 4.9 million in 2022, of which local aftermarket sales decreased to 1 million units from 1.6 million units in 2022.
“New labour union wage rate negotiations were successfully concluded in February without disruptions. Despite the loss in volumes, Mutlu Akü’s pre-hyperinflation Ebit (earnings before interest and tax) was expected to be about 90% of the comparative R530m when translated into South African rand earnings,” the group said.
Over the financial year, Türkiye interest rates increased to 42.5% and annual inflation peaked at 65%, contributing to a big rise in interest costs for the group.
De-risking options for the business were continuing. These were largely focused on the recovery of the wiring business at Hesto Harnesses, following the significant losses incurred in the first half, as well as stabilising Mutlu Akü in Türkiye.
South African vehicle OEM production volumes grew 20% from 2022, improving top line growth in the group’s automotive components business.
Automotive battery volumes sold in the Energy Storage Vertical declined 17% from 8.7 million to 7.3 million units, mainly due to the loss of export volumes primarily in Mutlu Akü.
Double-digit revenue growth was expected for 2023 compared to the prior year and Ebit, calculated as operating profit before interest and taxation margin of approximately 3% (3.3%).
BUSINESS REPORT