Interest expenses, Moll write-down weigh on Metair

Metair, an international manufacturer, distributor, and retailer of batteries and automotive components, has recently reported an interim loss of R217.7 million and a headline loss of 56 cents per share. This loss is primarily attributed to the write-down in its German investment, Moll, and interest expenses. In a recent interview with CNBC Africa, Theo Loock, the CEO of Metair, discussed the company's response to the challenging business environment caused by the COVID-19 pandemic and outlined their recovery strategy. Loock emphasized that Metair took the pandemic seriously from the beginning and prioritized employee health and safety. However, the company tragically lost three employees to COVID-19, with nearly 300 people exposed and over a thousand tracked and traced. Despite the challenges, Metair managed to focus on cash generation and preservation by deferring dividend payments and new capital projects. Additionally, the company made sure to address debt escalation, resulting in a net debt increase of only 60 million and a net free cash flow of 70 million during the period. Although the automotive components business was significantly affected, Metair's energy vertical business, particularly the battery sales, classified as essential services, continued to operate and generate cash. Metair remains optimistic about a U-shape recovery in both its automotive components business and energy vertical. However, a write-down on debtors' receivables and operational levels, including the investment in Moll, hindered the company's ability to turn an operating profit despite a 30% decrease in turnover. The lack of aftermarket business in Germany, unlike operations in Romania, UK, Kenya, South Africa, and Turkey, impacted Metair's performance in that region. Regarding dividends, Metair decided not to declare an interim dividend due to technical reasons aligned with the company's act. The board deferred the already declared dividend until the solvency and liquidity positions improve. This decision is crucial as Metair plans to secure 1.3 billion rand for its U-shape recovery. Looking ahead, the company aims to return to normal trading conditions post-COVID-19. The second quarter saw a significant impact on turnover, particularly in April, with zero revenue against the planned budget. However, with the classification as a level four participant, Metair was able to gradually increase capacity utilization to 100%. The energy storage business showed a quicker recovery due to geographic factors and essential service classification, reaching 100% in June. The CEO highlighted the need to sustain these levels in the second half of the year for a successful U-shape recovery. In terms of revenue composition, energy storage contributed 43% while automotive components brought in 57%. Metair sees potential in ramping up energy storage production to shift the revenue composition in favor of this resilient sector. The aftermarket and energy storage businesses have shown resilience, indicating opportunities for growth in these areas. Metair remains positive about the future and is confident in its recovery strategy.