Release Date: September 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Metair Investments Ltd (JSE:MTA, Financial) has stabilized its leadership and fully capacitated its head office, enhancing strategic control over subsidiaries.
- The sale of Mutlu is expected to remove offshore debt of around ZAR1.3 billion and simplify financial statements by eliminating hyperinflation accounting complexities.
- Hesto's turnaround is on track, achieving an EBIT margin of 3.9% for the first half of 2024, compared to a ZAR711 million loss in the previous period.
- The company achieved a 6.8% operating profit margin, excluding hyperinflation effects, surpassing their target of 5% to 6%.
- The sale of Mutlu is expected to be accretive to earnings, with a projected headline earnings per share of ZAR0.79 post-disposal.
Negative Points
- Metair Investments Ltd (JSE:MTA) reported a decrease in EBITDA and EBIT due to hyperinflation accounting in Turkey.
- The company's headline earnings per share showed a small loss, negatively impacted by Turkish operations.
- Group net debt is high, sitting at ZAR3.4 billion, and ZAR4.8 billion including Hesto.
- The Competition Commission issue remains unresolved, with no expected formal decisions until next year.
- OEM market volumes were down 7%, with significant declines from key customers, impacting profitability.
Q & A Highlights
Q: With the new minister in the Department of Trade and Industry, where do you see support for the auto industry going in South Africa?
A: Paul O'Flaherty, CEO, expressed cautious optimism about the medium-term support for the automotive industry in South Africa. He highlighted the importance of the automotive sector to the country's manufacturing industry and job creation, noting the presence of new entrants like Stellantis and some Chinese manufacturers.
Q: What is the expected time frame before Hesto can be included in the consolidated numbers again?
A: Paul O'Flaherty explained that the inclusion of Hesto in consolidated numbers is primarily an accounting issue. They are engaging with auditors and the Yazaki shareholder, hoping to account for Hesto as a subsidiary from next year.
Q: Could you discuss the sustainability of the sharp improvement in First Battery's profitability?
A: Paul O'Flaherty noted that First Battery has shown significant improvement due to enhanced production efficiency and market diversification. He expressed confidence in the sustainability of its profitability.
Q: What will the CapEx obligation on Metair be at Hesto with Toyota gearing up for the new Hilux?
A: Paul O'Flaherty mentioned that the CapEx obligation would depend on negotiations with Toyota regarding tooling and space constraints. The specifics are still under discussion, and no definitive number can be provided at this stage.
Q: Are you concerned about the rapid rise in market share by Chinese and Indian car brands, and how does this impact your future plans?
A: Paul O'Flaherty acknowledged the threat posed by Chinese and Indian car brands but emphasized that this is a broader question for the South African automotive industry. Metair plans to follow the path of Chinese carmakers investing in South Africa and focus on efficiency and engagement with local OEMs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
