Barloworld sees strong revenue growth, but may write off Russian assets | Fin24

Barloworld has been an official Cat dealer since 1927

In a trading update for the five months to end-February, Barloworld said both revenue from continuing operations and operating profit increased by double digits compared to the previous year.

This is despite the invasion of Ukraine, and resulting sanctions against Russia. Barloworld earns around 20% of its revenue from Russia.

Barloworld has been in Russia since 1998. Its subsidiary Vostochnaya Technica is the official dealer for CAT construction, mining and industrial machinery in large parts of Russia.

“To date we have had some cancellations from some of our customers. We anticipate further cancellations once the full extent of sanctions, supply chain disruptions and recent announcement by Caterpillar of the suspension of their manufacturing facilities at the Tosno plant in Russia has been fully absorbed,” Barloworld said.

The company said it may impair some of its assets in Russia.

But despite the disruptions caused by the Ukrainian invasion and the impact of Covid-19 on Mongolia, its Eurasian equipment division delivered strong results. Revenue rose by 11% from a year before, with Russia being the main driver of this increase. Operating profit rose 34% thanks to strong mining sales.

The order book for Equipment Eurasia at the end of February reached a record $314 million.

Its equipment division in southern Africa increased revenue by 2.3%. “Exceptional growth in both machine and parts sales in Africa outside of South Africa was offset by the low activity in South Africa, which was impacted by delayed deliveries.” But its order book increased by 43% to R4.6 billion on the back of strong mining demand and improved activity in South Africa.

Its car rental business saw a 205% increase in operating profit compared to last year, and was 17% higher compared to pre-Covid 2020 levels.

“The solid base of replacement (insurance) business, a rebound in domestic and corporate travel, increased uptake of the subscription offerings and green shoots of inbound travel have contributed to trading volumes being at 65% of 2019 levels and a record EBITDA margin at 27.1%.”

Barloworld is currently investigating how to exit its investment in its car rental and leasing business, Avis Budget Southern Africa, by the end of the year.

It is currently looking at either selling it or listing the company on the stock exchange.