Retrenchments on the cards as Barloworld prepares for post-Covid reality

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Retrenchments on the cards as Barloworld prepares for post-Covid reality

Published Date: 2020-05-29 | Source: Stephen Gunnion | Author: Stephen Gunnion

Retrenchments on the cards as Barloworld prepares for post-Covid reality

The industrial group says its Automotive and Logistics and Equipment southern Africa operations will be most affected by the job cuts.

Barloworld plans to cut jobs across its operations due to structural changes that have resulted from Covid-19 - as well as trading activity that is expected to be lower for longer.

The industrial group has already implemented austerity measures and other initiatives aimed at softening the impact of the pandemic that are expected to result in big cost savings this year and a lower cost base in the future. However, most of its businesses have been severely affected by restrictions on trade as well as various lockdowns. And it says the prospects of a quick recovery are low.

In a business update, Barloworld said the retrenchment process was expected to be completed by the end of its financial year in September, with significant staff reductions at its Automotive and Logistics and Equipment southern Africa operations, as well as at its head office. It didn't specify how many positions would be affected.

The group's Automotive and Logistics business were significantly impacted by the SA lockdown last month. Fleet utilisation at its Avis Budget Rent-A-Car business slumped to 30% from 75% as air travel was curtailed and borders were closed. However, it said activity was starting to improve as lockdown restrictions were eased. Its Motor Trading business was also impacted by the prohibition of new vehicle sales and it expected volumes to remain under significant pressure. Volumes at its Logistics businesses were also affected.

Barloworld said its Equipment southern Africa operation found some support from steady demand for mining equipment in SA and the rest of Africa, while trading in Russia remained resilient, helped by strong sales in the gold mining segment and a resilient aftermarket performance. However, pressure on Russia's budget caused by Covid-19 and a decline in the oil price had adversely affected the construction segment in that country.

The group said its gearing remained low and well within its covenant agreements with its lenders. At the end of April, it had a cash balance of more than R5 billion with its net debt position increasing to over R4 billion and over R7 billion headroom on its committed debt facilities. It also has non-committed facilities of more than R3 billion.

Barloworld said the impact of Covid-19 on Tongaat Hulett Starch, which it agreed to buy in February, would result in the transaction failing to meet the terms of the Sale and Purchase Agreement, triggering a Material Adverse Change. Tongaat Hulett has contested the assertion and the process is undergoing an independent assessment process.

The group expects to release interim results for the six months to end-March on 30 June. Its shares rose 1.9% to R68.26 yesterday.





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