Durban - Results from Barloworld, the large distributor of international machinery brands and yellow metal king, were at least in line if not better than expected, say analysts.
But a few hours after results for the year to end-September 2008 were released, there was no positive effect on the share price. It lost nearly 1% on Monday to 4 801c/share (at 10:30) and was down more than 10% for the week, in addition to a punishing 62% for the past year.
Results are also messy and not really comparable due to discontinued operations, secondary tax on companies (STC) charges on the prior year's special dividend, and a black economic empowerment (BEE) charge of R337m.
So the "normalised" headline earnings per share gain of 29% (excluding these charges) does not mean much.
A better indication of Barloworld's performance is probably the 18% increase in revenue to R46.8bn and operating profit (without the BEE charge) up 31% to R2.99bn.
Results were very much a tale of two divisions: equipment and logistics. The increase in revenue and operating profit in both were significant. The other two divisions - automotive and handling - saw operating profit decline.
Still, results were solid. But this financial year is going to be tough, for reasons way beyond Barloworld's control.
CEO Clive Thomson did not commit his outlook to a forecast on whether earnings would increase or decrease. He did however say that because of the deteriorating global growth outlook and the impact of the financial crisis on the real economy "we are likely to face more difficult trading environments in most of our major markets and geographies in the year ahead".
Caterpillar sales surprise
This could be why the share price remains muted. The outlook for heavy metal, handling equipment and the motor retail business is not inspiring, despite increased spending on capital projects and infrastructure development.
Fortunately, equipment is the big money earner and the good results in this division drove results overall. Performance was particularly good in southern Africa. Dirk Kotzé, portfolio manager at Coronation Fund Managers, said while results were pretty much in line with what he was expecting, the Caterpillar brand in South Africa seemed to have done better than expected. This is surprising as the industry is competitive.
One of the key developments in the equipment division was the turnaround in the rental business. Conditions were not that good abroad, with Barloworld reporting a slowdown in Spain and lower demand in Portugal.
The group seems prepared for slower activity levels, though it says growth opportunities will be looked at.
But for the time being, Barloworld will focus on improving cash flow by limiting capital expenditure and reducing working capital.
This financial year's results should offer a cleaner picture of Barloworld, a much-changed group with the unbundling of PPC, separate listing of the old coatings business and the sale of the scientific business.
The share price is roughly a third below net asset value of 6 451c/share. It's undoubtedly cheap, but don't expect much excitement soon.
- Fin24.com