Barloworld (BAW) Trading Update summary

Restructuring and cost management

• VT division is undergoing restructuring, targeting a reduction of about 200 positions to maintain profitability and break even, despite declining activity levels.

• Ingrain achieved a 15% EBIT increase on flat revenue due to prior restructuring, headcount reduction, streamlined leadership, procurement savings, and improved plant efficiency.

• Further margin improvements in Ingrain are expected from ongoing cost containment and operational efficiencies, with potential support from lower maize prices.

• Operational improvements and cost discipline at Ingrain led to stronger free cash flow and better results.

• VT is expected to continue at break-even as the business structure is optimized and remains self-sufficient in funding.

Regional and segment performance

• Unrest in the DRC has delayed investment decisions and a key parts replacement project, with the legislative environment also causing delays for mining service providers.

• Equipment Southern Africa saw a stock write-down due to inventory policy and a customer’s shift in maintenance strategy; the rental book is growing, reflecting capital constraints in the market.

• Commodity sensitivity in Equipment SA remains high, with coal price declines a concern, but some optimism exists for Zambian copper mine expansions.

• Equipment southern Africa saw revenue fall 9.2% to R8.8bn, with EBITDA down 6.1% to R949m; order book increased 13% to R3.4bn.

• Barloworld Mongolia posted 49.5% revenue growth to $116.3m, with EBITDA up 24.2% to $25.0m and operating profit up 26.7% to $22.6m, though margins declined.

Mongolia operations and outlook

• Mongolia’s order book declined from $117.8m to $27.8m after significant deliveries, but new orders and a government tender have been secured; the pipeline remains solid, with significant opportunities pending, especially at Oyu Tolgoi.

• Aftermarket revenue in Mongolia is growing, now contributing about 48%, and is expected to remain strong due to a large installed base.

• Regulatory uncertainty persists as the government seeks larger stakes in mining projects, slowing exploration but not halting stay-in-business CapEx or some greenfield projects.

• Barloworld Mongolia posted strong revenue and EBITDA growth, but margins declined.