Latest news with #Sewela
The Citizen
27-05-2025
- Business
- The Citizen
Barloworld extends investigation into Russian subsidiary
Around potential export control violations. Vostochnaya Technica's operations have been 'significantly reduced by sanctions and the prolonged geopolitical environment', largely because its market in the area 'has shrunk'. Picture: iStock An independent investigation into potential export control violations by JSE-listed Barloworld related to sales of certain goods to its Russian subsidiary Vostochnaya Technica (VT) has been further extended to September 2025. The investigation was launched in 2024, with Barloworld informing shareholders that it submitted an initial notification of voluntary self-disclosure to a US Commerce Department agency, the Bureau of Industry and Security (BIS), on 5 September 2024 regarding the potential export control violations the company was investigating. Barloworld Group CEO Dominic Sewela said on Monday the company was disappointed to learn last year of the potential export control breach in its VT division and the investigation is ongoing. 'As announced this morning [Monday], BIS has granted a further extension from 2 June to 2 September, and we will keep you updated as we progress with that investigation.' ALSO READ: 'Complex' investigation Barloworld head of legal Sandile Langa said the extension is purely a function of the complexity of the investigation. Langa said the investigation is being conducted by an independent forensic firm, which is working under the guidance of US legal counsel that had requested the company apply for the further extension on the basis of where 'we are in the progress of the investigation'. 'You must appreciate that the US authorities are not likely to have agreed to this further extension unless they were satisfied that the company was taking all the correct steps in the investigation,' he said. Langa's comments were made during a briefing on Barloworld's interim financial results for the six months to 31 March 2025. Barloworld is still the subject of a proposed buyout by a consortium led by Saudi Arabia's Zahid Group, which if successful will result in Barloworld delisting from the JSE. Sewela said Barloworld's VT business has been significantly reduced by sanctions and the prolonged geopolitical environment, largely because the addressable market has shrunk in that area. 'At the current rate, we expect our operations in VT to trade towards break-even levels and to remain self-sufficient.' Sewela said VT is close to break-even but the business is basically selling parts, which are not impacted by export control, and therefore the discipline is that you are able to sell these parts. He said Barloworld is embarking on initiatives to try and make sure it does not lose its people in VT but stressed 'it is difficult to sell labour in a smaller addressable market'. 'Therefore, I'm not saying we will always remain profitable and hence we are giving guidance that as soon as we dip below that level, we will unfortunately be forced to take people out [of the business]. 'The business is self-sufficient in terms of funding and there is more cash in that business than I would like us to have given – you can't take the cash out,' he said. ALSO READ: Questions over new Barloworld's strategy Interim results Barloworld on Monday reported that group revenue declined by 5.8% to R18.1 billion in the six months to 31 March 2025, driven by a 36.8% decrease in revenue at VT and a 6% decline in Barloworld Equipment Southern Africa. Operating profit from core trading activities improved by 1.3% to R1.48 billion from R1.46 billion, with the group operating margin deteriorating to 8.8% from 9.7%. Excluding VT, the operating margin expanded by 0.3% to 8.8% from 8.5%. Headline earnings per share slumped by 20.5% to 423 cents from 532 cents, largely because of the expected decrease in VT's trading activities from the impact of continuing sanctions in Russia. Normalised headline earnings per share, which excludes VT, remained flat at 356 cents. An interim dividend per share of 120 cents was declared, which is 42.8% lower than the interim dividend of 210 cents declared in the previous corresponding period. ALSO READ: Barloworld CEO accused of conflict in potential buyout by Saudi-led consortium Operating environment Sewela said 2025 has been typified by volatility, uncertainty, complexity and ambiguity, with the world changing faster than ever in terms of economic shifts, global politics and climate changes. 'In such a dynamic environment, businesses such as ours, especially those in cyclical industries, need to look beyond short-term gains and prepare for long term resilient strategies,' he said. Sewela said the trading conditions Barloworld operated in during the period were indicative of the market entering a lower cycle where commodity prices are subdued. He said Barloworld's Southern African mining clients remain cautious about investment and are preferring to rent equipment from the group than to buy while the recovery in the construction sector is still in progress. Sewela added that in Zambia, the copper mines in particular, have been spared by favourable copper prices. He said Barloworld's equipment business in Mongolia continued to grow but at a slower pace. Sewela said the 2024 optimisation actions at Ingrain are yielding the desired benefits, resulting in a lower fixed cost base and improved operating efficiencies. He said Ingrain generated stable revenue, with lower overall volumes offset by inflationary price increases. Turning to the outlook for the group, Sewela said the future effects of tariffs on Barloworld's business remain uncertain and the group is actively assessing the medium to long term implications of these tariffs. 'That said, we have consistently demonstrated our ability to successfully navigate volatility in the past by leveraging our key endowments and having a firm grip on what we can control,' he said. ALSO READ: Now labour dept questions employment equity at Truworths, TFG and Barloworld Buyout update The initial buyout offer by the Newco via a scheme of arrangement was overwhelmingly rejected at a general meeting in February this year, triggering a standby offer that, among other things, is subject to at least 90% of eligible shareholders accepting the offer. However, Newco has the right to waive the 90% threshold and proceed to acquire less shares from shareholders who have accepted the standby offer, with any decision on the waiving of the threshold extended and now expected by no later than 30 June 2025. The Public Investment Corporation, which owns 22% of Barloworld's ordinary shares, in April this year announced that it had accepted the standby offer. This article was republished from Moneyweb. Read the original here.
IOL News
26-05-2025
- Business
- IOL News
Barloworld's interim earnings drop amid onging Zahid Group takeover attempt
A 550 kVA Cat C15 diesel generator set being assembled at Barloworld Power's Boksburg facility. The group is experiencing tough trading conditions in line with macro-economic volatility in the markets where it operates, especially in its Russia business, where sales has decline due to the impact of sanction. Image: Supplied Barloworld, still the subject of a controversial takeover bid by Saudi Arabia-based Zahid Group and CEO Dominic Sewela, nearly halved its interim dividend to 120 cent a share (210 cents per share). This followed a 20.5% decline in headline earnings per share (HEPS) to 423.2 cents for the six months to March 31, with the results impacted by a weak performance in the Russia business due to the impact of sanctions in that country. Many JSE listed companies exited their businesses in Russia after the onset of the war in Ukraine, but Barloworld opted to retain Vostochnaya Technica (VT). Excluding VT, normalised HEPS was flat at 356 cents per share. Sewela said trading conditions were broadly aligned with their expectations of stable to modest economic growth, guarded optimism, moderated by cyclicality and subdued commodity markets. "Barloworld has shown remarkable resilience, especially excluding the VT results. The positive impact of the restructuring of Ingrain in 2024 is especially evident. We continue to navigate the evolving environment by pulling the levers within our control,' said Sewela in a statement. Regarding the Zahid takeover bid that was initially rejected by shareholders, an announcement about the requisite 90% acceptances from shareholders to be received in terms of a standby offer, or whether the bidding company wishes to waive the threshold, was expected to be made by June 30, 2025. Group revenue fell by 5.8% to R18.1 billion, weighed down by a significant reduction in VT revenue. 'The board remains vigilant in overseeing the investment in VT and will conclude and communicate an official strategy in due course,' the board said in the results.. Earnings before interest, tax, depreciation and amortisation (EBIDA) fell by 9.1% to R2.2bn. Excluding VT revenue EBITDA increased by 3%. The EBITDA margin fell to 12.4% from 12.9%. Excluding VT, EBITDA margin expanded from 11.9% to 12.5%. The group invested in working capital to support growth objectives and used free cash flow to reduce floor plans, which were more expensive than its available facilities. As a result, net debt increased by R1.6bn to R4.8bn. Net asset value per share increased to 9 235 cents from 9 111 cents. Solvency and liquidity remained strong. On the outlook, Sewela said that since the end of the first quarter, financial markets and commodities were very volatile, rapidly reacting to developments regarding US tariffs and associated uncertainties. 'In such an unpredictable environment, effective risk management and scenario planning are crucial, especially for complex supply chains as well as the fragile geopolitical state of affairs.' The board said several major South African mining corporations reported that, despite prevailing market turbulence, primary commodity trade routes were largely unaffected due to the exclusion of platinum group metals, coal, gold, manganese and chrome from tariff implications. 'We continue to assess the potential impact of tariffs on our iron ore, steel, and diamond customers.' Some reorientation and dislocation of physical trade flows was anticipated in the near future, which could present both opportunities and challenges for Barlworld's customers. 'The potential consequences of slower economic growth and a fragmented trading environment may be more significant. The future effects of tariffs on our business remains uncertain, and we are mapping out the medium- to long-term ramifications for our business,' the board said. The US Department of Commerce's Bureau of Industry and Security (BIS) had extended a deadline to September 2 for Barloworld to complete an investigation on potential export violations. VT's EBITDA fell 68.1% to R133 million. Operating profit of R104m decreased by 73.1% compared to the prior period. VT was expected to trade at breakeven levels as the structure was optimised for lower activity levels. VT was self-sufficient in terms of its funding requirements. EBITDA for Equipment Southern Africa fell 1.9% to R1.3bn. Operating profit declined 15.1% - the margin reduction resulted mainly from changes in the sales mix, from lower aftermarket activity.
