Barloworld confident that it has headroom to weather the storm

CAPE TOWN – Heavy equipment, automotive sales and logistics group Barloworld said trading in the five months to end February was challenging due to low business confidence, volatile commodity prices and depressed consumer demand.

In a pre-close operational update yesterday, the group said the impact of coronavirus (Covid-19) on its operations was uncertain at this stage, but a strong balance sheet and a stable, mature business platform placed the group in a solid position to weather the storm. It said it had reviewed its banking facilities and modelled its liquidity over 18 months.

Barloworld said it had more than adequate headroom to weather the storms. However, given the risk to growth, measures had been put in place to reduce costs. The balance sheet held a committed funding capacity of R7.2 billion at February 29.

After considering the acquisitions of Wagner Asia and Tongaat Hulett Starch, and the recent share buy-back programme, the debt to earnings before interest, tax, depreciation and amortisation ratio remained below 2 times. Negative knock-on effects from the disruption to the global economy from Covid-19 containment measures in sectors such as tourism, supply chains, commodities and overall market confidence, were increasing rapidly. Commodity prices were expected to remain depressed in the short-to-medium term, influenced by the length of the lockdowns put in place by key economies.

Challenging trading conditions were expected to intensify in the second six months of the 2020 financial year. Tough decisions were being taken to optimise the motor retail business unit and address under-performing areas in logistics. The disposal of SmartMatta and other logistics units remained in progress.