Metair’s turnaround: Operating profit surges as vehicle production increases

Metair’s turnaround continued in the six months to June 30, with operating profit up 27% to R450 million after the supplier of auto components recovered volumes at its key vehicle manufacturer customers and it implemented measures to improve efficiency.

Total headline earnings per share (HEPS) (including discontinued operations) rose significantly to 65 cents a share. This compares to a loss of 3 cents per share in the same period last year, which included losses from the recently disposed of Türkiye battery manufacturer, Mutlu Akü.

“Our focus on the turnaround process has been on areas within our control, notably structural simplification, operational execution, and customer support. This allowed us to better adapt to market shifts and volume fluctuations while providing agility to be more efficient and flexible,” said the CEO, Paul O’Flaherty, in an online presentation.

Earnings before interest, taxation, depreciation, and amortisation increased by 40% to R716m. Revenue was up 53% to R8.66bn. HEPS from continuing operations fell 8% to 71 cents a share.

There were improved operating performances across most of the subsidiaries. Hesto Harnesses was included for three months of the six-month period, partially offset by a R24m earnings before interest and tax loss from retailer AutoZone, which was expected given AutoZone was emerging from business rescue. Autozone was expected to grow financial from the 2026 financial year onwards, said O’Flaherty.

He said the company had focused on manufacturing excellence in supplying OEM customers and bedding down AutoZone for the planned growth in the aftermarket segment. Integration and the identification of synergistic opportunities at AutoZone were progressing.

“Improvement initiatives have also resulted in higher revenue and improved operating profit at Hesto, the group’s major wiring harness supplier,” he said.

South Africa’s local market vehicle production increased by 4% year-on-year, to 282 000 vehicles in the first half of 2025, from 270 000 vehicles in the prior period. O’Flaherty said he expected vehicle production for the 2025 calendar year to exceed that of 2024, all things being equal.

Naamsa reported in August that, notwithstanding the US 25% automotive tariffs imposed in April 2025, vehicle exports were resilient, and year-to-date vehicle exports were still 2.5% ahead of the same period in 2024. This was despite vehicle exports to the US declining by 82% in the first half.

“We do not expect the tariff turmoil to have a direct impact on our OEM customers, as these customers do not supply into the US market. However, the tariffs are expected to affect the broader South African economy, the extent of which will only be evident over time,” said O’Flaherty.

Net debt increased to R5.1bn from R2.7bn at the end of the 2024 financial year. The increase was driven primarily by the consolidation of Hesto’s net debt of R1.5bn at April 1, 2025, as well as a decline in cash to R143m from R808m in 2024.

“A debt restructure was successfully implemented over the past six months, which has allowed for a repayment profile that matches expected earnings growth and cash flows over the repayment period,” he said. A range of strategies was being implemented to de-gear and enhance earnings and cash generation.

“The improvement in Hesto’s performance is now well entrenched, and the initiatives to stabilise AutoZone are bearing fruit. The restructured debt package has provided a sustainable platform from which to reduce debt further,” O’Flaherty said.

There was renewed focus on expanding Metair’s product offerings and entering new sales channels, also in other African markets. The group was cautiously optimistic in the outlook. It group would likely be impacted by the launch of a new model next year by a customer and plans by a customere to right-size, he said.

Visit:www.businessreport.co.za