Metair to create 3 000 new jobs in SA this year

JSE-listed automotive components and energy storage solutions manufacturer Metair Investments is to create more than 3 000 new jobs in South Africa this year through a major investment in a new project for Ford South Africa.

Metair reported on Thursday that capital expenditure of R1.6 billion had been approved for its current financial year and a further R272 million in capital expenditure had been approved in the first half of 2021.

Chief financial officer Sjoerd Douwenga said the capital expenditure in land and plant and equipment for Hesto Harnesses for the Ford projects totals about R1.1 billion and is split over three years, which started in 2020.

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Ford and its suppliers invest R20.13bn in South Africa

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Douwenga said there will be further investment in working capital into Hesto Harnesses next year of R300-400 million.

He added that there are smaller investments in two or three of Metair’s other businesses, including about R200 million each in its plastics business and lighting business.

“We might also localise the automotive copper wire into Hesto but that is not approved yet and is not in the numbers mentioned,” he said.

Douwenga said the additional capital approved in this financial year is related to incremental Ford business Metair has secured, which is mainly in Metair’s plastics business and involves additional localisation by Ford.

Read: Metair may scrap its plans to split into two

“Unfortunately it comes from a supplier that did not survive Covid-19 financially and we got the business on the back of that. It’s really big business,” he said.

Metair CEO Riaz Haffejee said they are developing two buildings related to the Ford project – one of which is a 3 500m² facility in Stanger (KwaZulu-Natal) for Hesto Harnesses because its existing building is full.

He added that this facility, which is almost complete, will employ 3 000 additional people between now and the end of the year.

Haffejee said Metair is also developing a building of some 7 500m² in the Tshwane Automotive Special Economic Zone (TASEZ) next to Ford SA’s production plant in Silverton in Pretoria, which will create less than 100 new jobs.

Read: Automotive component suppliers commit R4.3bn to establish operations in Tshwane

He said wiring harnesses will be manufactured for Ford SA in Stanger and shipped to the warehouse facility in the TASEZ, where they will be sequenced into line side delivery to Ford SA.

Hafferjee pointed out that Metair has also developed another facility in the TASEZ for Automould, which is supplying plastic injection-moulding parts to Ford SA and is already “under commission”.

Ford SA’s executive director of government affairs for Africa Dhiren Vanmali confirmed in September 2020 that more than R4.3 billion will be invested in the TASEZ by 12 Ford suppliers and related services companies who had committed to establishing operations in the SEZ.

It was later announced in February this year that a total of R20.13 billion will be invested in South Africa by the Ford Motor Company and its suppliers for the production of the new Ranger and a bakkie for Volkswagen at Ford’s assembly plant in Silverton in Pretoria and the adjacent TASEZ.

Andrea Cavallaro, director of operations at Ford’s International Markets Group, said at the time the investment will create 1 200 jobs at the Silverton plant to increase Ford’s workforce to 5 500 at the plant and add a further 10 000 jobs to the already 50 000 jobs across Ford’s local supply network.

Read: Ford and its suppliers invest R20.13bn in South Africa

Douwenga said Metair has also approved additional investment for Mutlu Akü, its energy storage business in Turkey, to increase absorbent glass mat technology production capacity for the battery business.

He said Mutlu Akü is the only local start-stop battery producer in Turkey and has been growing its market share quite significantly.

“The Turkish market is European-focused, with 80% to 90% of the vehicles produced in Turkey ultimately ending up in Europe.

“With European emission standards continuing to increase and the carbon footprint reduction initiatives, a lot of vehicles in Turkey now – even smaller vehicles – are fitted with stop-start batteries,” he said.

Douwenga added that Turkey had a good incentive programme for investments in new technology and the localisation of an import and Metair will get back 55% of its gross investment in this project.

Robust interim results

Metair on Thursday reported a strong turnaround in earnings in the six months to June this year from the loss in the previous Covid-19 pandemic impacted corresponding period in 2020.

Headline earnings per share improved to 170 cents from a loss of 56 cents a share in 2020.

Group revenue increased by 51% to R5.9 billion as operational activities recovered from the impact of the stringent lockdown measures in South Africa, Turkey and Europe in the first half of last year.

Group operating profit rose to R545 million from an R18 million loss.

Haffejee said Metair’s teams have done an excellent job in executing the group’s Covid-19 response strategy to ensure that the group’s operations recovered to benefit from higher levels of demand.

Cash and cash equivalents ended the period at R1.1 billion and net debt increased from R805 million to R1.2 billion but unutilised and available finance facilities across the group, including foreign currency rand equivalents, totalled R2.4 billion at the end of the reporting period.

To support the group’s continued expansion, Metair has successfully negotiated the refinancing of R750 million in revolving credit facilities maturing in August 2021 and a three-year extension to R840 million in preference shares funding maturing in December 2021.

Douwenga said Metair has a very clear view of what the post-Covid-19 recovery could look like, which for the automotive components business involved delivering to their existing customers and servicing their existing business with existing customers.

“Then ahead of us we have smaller, medium projects and projects like Ford in the pipeline, which is transformational from Metair perspective,” he said.

Douwenga said vehicle production by the South African automotive industry totalled just over 600 000 in 2019, was at about 420 000 in 2020 and Metair believes it will be close to 90% of 2019 levels this year.

But Douwenga said the big volume model launches being planned by Ford, Toyota and Mercedes-Benz provides potential structural growth for the industry.

Metair believes South African automotive production could reach in excess of 750 000 by 2023, a new record.

“Metair will participate in that growth but has also expanded its participation within that growth, which should result in significant benefits for Metair,” he said.

Shares in Metair dropped 3.42% on Thursday to close at R24.55.