18 January 2019 12:08:15 PM

Metair Investments performed well in 2017

- 2018-03-15 12:01:59 PM

Metair Investments Limited announced its condensed audited consolidated results for the year ended 31 December 2017 and dividend announcement.


Headline earnings per share increased 23% to 281 cents per share
Revenue increased 6% to R9.5bn billion
Acquisition of 25% of MOLL provides a presence in Germany and micro-entry into with through partner Chaowei
B-BBEE Level 4 or better for most South African subsidiaries
First lithium-ion battery powered concept vehicle produced in Romania

Metair performed very well in 2017 as we continue to operate in a very dynamic and challenging environment especially as technology shifts in propulsion solutions develop in the mobility space.

Adjustments and preparations to accommodate these shifts brought about the need to deepen the understanding of Metair's business design platform and expand our business narrative.

In the absence of major technology or market shifts, it was acceptable for the Metair business narrative to be centred around our products. This is no longer the case
and we need to shift our business narrative to focus on the needs that our products fulfil and market messaging that is aligned and well understood by stakeholders.

In our energy storage vertical, we provide energy and finally sell watt-hours. Good progress was made in becoming a diversified multi-site Giga factory. The energy storage vertical sold 9.7 Giga watt-hours of our 11.5 Giga watt-hours capacity. Our total Giga watt-hours sales were on par with Tesla's Giga factory automotive output.

Metair cannot be a single site Giga factory as our customer base is in multiple locations and the watt-hours we sell are required by vehicle manufacturers and vehicle owners in different countries and diverse geographical locations. Our strategy is to become a multiple site Giga factory.

In our automotive components vertical, we sell a number of product solutions ranging from lighting, ride comfort, heat exchange, vehicle electrical distribution and plastic part solutions. These solutions are only provided in the South African market with solution specific manufacturing sites all over South Africa. Our operations sold 1.2 million lighting units, 25.2 million plastic mouldings, 2.7 million wiring harnesses, 0.7 million brake system parts, 6.1 million HVAC system parts and 1.5 million suspension systems. Enough to supply the equivalent of 200 000 Teslas.

Our challenge in an ever-changing technology environment is to keep up with product development to fulfil the energy (watt-hour) and components (parts) requirement of our international customer base.

The automotive vertical bounced back after a difficult 2016, returning to good profitability levels after the disruptions of the new vehicle launch. Hesto in particular moved from a loss last year back to a profit contribution.

Group revenue increased 6.3% to R9.5 billion as the automotive component vertical regained stability. The energy storage businesses in Turkey and Romania grew revenue by 31% in local currencies, but this reduced to 21.1% in our consolidated accounts when translated into Rand. Operating profit grew 15.9% and the group margin expanded to 8.9% (2016: 8.2%) supported by the margin recovery in the automotive component businesses. Group earnings before interest, tax, depreciation and amortisation (EBITDA) increased 17.6% to R1.2 billion and headline earnings rose 22.8% to R555.6 million, which translated into growth in headline earnings per share growth of 22.6% to 281 cents per share.

Metair's net debt/equity ratio of 29.5% is appropriately conservative and group borrowings from third parties decreased marginally to R1.8 billion. We addressed the first tranche of debt due on the Mutlu Akü acquisition in October 2017 by redeeming two thirds from available cash and unutilised debt facilities, and extending the date on the remainder. We also secured a number of commitments from several leading South African banks for longer-term funding and liquidity at very competitive rates. Metair is comfortably in compliance with all of its lenders' covenants and at 31 December 2017, the group had access to unutilised facilities of approximately R587 million (Rand equivalent), US$95 million and a revolving credit facility of R83 million.

Automotive components vertical (including Hesto)
Turnover recovered strongly, increasing by 5.2% to R4.4 billion, contributing 41% to group revenue and 42% to operating profit as production ramped up and stability returned to the businesses following last year's model launch. Profit before interest and tax (PBIT) margins increased to 10% from 6% in 2016 due to the benefits of
improved consistency in production volumes, manufacturing efficiency, and the stronger Rand against the Euro, US Dollar and Japanese Yen throughout the full year.

Energy storage vertical
Revenue from the energy storage vertical increased 6.3% to R6.2 billion (59% of group revenue) and operating profit grew 6% (58% of group operating profit).

Battery sales in Turkey and Romania peak in the winter months of the last quarter of the year and strong performances at Rombat and Mutlu Akü over these months partially offset the impact of depreciating currencies and higher lead input costs. In the South African market, competition remained high and performance improved as Phase II of the correction at First National Battery (FNB) progressed. These factors resulted in a consistent PBIT margin of 9.5%.

Operational insight
Automotive components vertical
The exit of General Motors was a blow to the country's automotive industry. We are pleased that Isuzu – our primary brand in the General Motors stable chose to remain
in the country. It is important to note our appreciation for the responsible way that General Motors chose to exit the local industry – their assistance was crucial in mitigating most of the retrenchments that would otherwise have been necessary.

Metair provided input into the review of the Automotive Production and Development Programme (APDP) and believes that the programme as currently proposed will continue to support the South African automotive industry effectively.

Energy storage vertical
Our strategic focus has shifted to bulking up the energy storage vertical and as our geographical presence expands and we continue to demonstrate our considerable
intellectual capital in the vertical, we are receiving requests for technology transfer from companies in our target growth areas.

Our positive outlook on Metair's performance in the year ahead is dependent upon,  inter alia, the successful execution of our strategy, original equipment (OE) volumes, 
geopolitical conditions, a peaceful labour environment, efficiency improvements,  internal inflation recoveries and the exchange rate. Subject to such factors, we expect 2018 to be a growth year for the group.