Just as the South African economy has boomed, so has Barloworld. The group released earnings for the year to September 2006 on Monday, showing that its earnings had grown 32%, helped by a strong second half. It also said it aimed to double its value by 2010, the year of the Soccer World Cup.
Around 80% of the group’s earnings come from Southern Africa and it is one of the 10 largest companies listed on the JSE, with a market capitalisation of nearly R30-billion.
Barloworld also said it had appointed advisers for a black economic empowerment transaction and was evaluating possible alternatives.
Headline earnings per share were posted at 1 171 cents, from 888 cents for 2005, helped by stronger operational results, positive fair value adjustments on forward cover contracts, owing to a weaker rand, and an accounting gain from a change in accounting policy for defined benefit pension funds in the United Kingdom.
Operating profit increased 21% to R4,133-billion, while revenue grew 13% to R42,693-billion. Cash flow from operations jumped 38% to R4,931-billion. The group announced a final dividend of 450 cents a share, bringing the total dividend to 600 cents a share, 32% up on last year.
The market loved the results, and Barloworld shares were up 5% by the next day. This was despite the group having issued a trading statement last month that told investors results would be between 25% and 35% higher.
Barloworld is one of the largest and most diversified South African companies.
Its performance is seen by many as a barometer of the country’s economic health, since the group is involved in a number of key industries, including mining and construction, as an equipment supplier. Barloworld owns 70% of cement manufacturer PPC, and is the Avis licensee for Southern Africa. The group supplies several car brands, including Cadillac, Hummer and Subaru in southern Africa.
About 80% of the group’s earnings come from Southern Africa, but it also has significant overseas interests, especially in Spain and Portugal, and in Russia, where it supplies equipment to Siberia.
Analysts said results were largely in line with expectations and that it was taking the right steps in dealing with underperforming assets and boosting returns.
The group is disposing of its steel-tube business. It is also downsizing its Australian coatings business, after a proposed acquisition of Wattyl was rejected by Australian competition authorities.
The group is “seriously exposed to fixed investment” said one analyst, and it has been able to take advantage of new mining developments and the construction boom.
Barloworld was bullish on prospects for the next few years. It said the overall outlook for 2007 is favourable, with increased infrastructure and mining investment in Southern Africa to benefit the group’s equipment division.
However, higher interest rates mean vehicle sales growth will slow. Over the next four years, the company’s goal is to double in size for the 2010 World Cup.