Record jump in profit for Metair

‘A reasonable overall result for automotive – but energy storage really outperformed our expectations’: CEO Riaz Haffejee.

FIFI PETERS: Metair, which supplies a number of car companies with parts used in manufacturing, as well as the aftercare market, released its results today. Its automotive business group profit didn’t quite hit pre-pandemic levels. On the other hand, its energy storage business group [profited] quite strongly, even going ahead of pre-pandemic levels.

We have the CEO of Metair, Riaz Haffejee, to explain the numbers to us. Riaz, thanks so much for your time. Let’s start with the car market. What exactly has got the brakes on the recovery there?

RIAZ HAFFEJEE: Thanks Fifi, and thanks for having me. Starting with automotive components, our performance in 2021, certainly the first half of the year, was on track for a decent performance. We thought that we would be around 90% to 95% of the 2019 volume, and we always thought that this was a fair expectation to have for the full year of 2021.

But from the second half of the year, when we had major supply-chain problems, and mixed in with that, conflating the issue, was chip shortages and a number of the other problems that we faced with looting and cyber problems in the steel industry strike. It just caused us too much volume loss. In the end we ended up with the industry just over the 500 000 mark in production. As a result we really didn’t get the best performance in margin terms from automotive. Although our turnover was up from 2019 volumes, there were too many costs that came into performance in automotive components that caused us a problem. So overall it was a reasonable result for automotive, but the second half of the year was terrible.

FIFI PETERS: We’re having this discussion a couple of months after your year-end. I’m just wondering if the factors that constrained growth then have improved as you and I have this conversation today.

RIAZ HAFFEJEE: I think they have to an extent. We still see a number of OEMs [original equipment manufacturers] still having an issue with chip shortages. I think that may improve in the second half of the year, as many of them seek to have more their own confirmation on supply for the year ahead. So I think that will improve, certainly from the OEMs that we’ve spoken to. That has been a problem at the start of the year.

[In] supply chain we still see the same levels of volatility, the same levels of cost, but I think we are a lot more organised. We are carrying a little more stock, so that it impacts us a bit less, and we are a lot more coordinated – not only internally, but with our OEMs as well. So we’ve tried to manage the situation better, but I think even that will improve towards the latter half of the year as we see some small incremental changes there that might be positive.

But Fifi, the problem is you end up with an issue that happens in Eastern Europe or another Covid outbreak in China, as they [have] today, and you could end up with another degree of complexity coming into [the] supply chain. So we have to be on our toes with it this year, and I think we have a better understanding of how to deal with it.

FIFI PETERS: Another degree of risk that everyone is talking about is of course climate change, and we’re seeing industries across the board trying to pivot their operations into a greener and cleaner way of doing business, car companies not being an exception. Can you tell us just locally some of the moves and the transitions that the local industry is making to prepare better for the future of driving, or electric cars as it were, just based on the kind of parts that they’re demanding from you.

RIAZ HAFFEJEE: Yeah, thanks. I think as car companies move to this new-technology world of NEVs, or new energy vehicles, as component manufacturers we will be also requested to move with that technology. The kind of components we make will be less affected because most of them are not drivetrain components or power components. They are trim, or they are suspension – and so forth. So we tend to have a fairly good position when it comes to new-energy vehicle positioning. As a result, as manufacturers start to think about and request information from us on what kind of technology we have that can support them in their transition – and we’ve had a number of discussions already with various manufacturers on how that could look in the years ahead – generally we find a very positive outcome that we are able to support, or we do have the access to technology that can support them. So I think from that point of view we are well positioned.

South Africa, as a production industry, I think will move and make that transition as OEMs bring that technology from their mother companies into South Africa as required, at the right time, and with new-model introductions.

From a sales point of view, however, I think that we are still waiting on what that regime could look like in terms of incentives, in terms of how the sales of EVs [electric vehicles] could look like in South Africa, which could further provide more demand for them from a production perspective. So I think we are making the move, but it’s going to come to us probably sooner rather than later.

FIFI PETERS: Let’s talk about your energy-storage business then, which has shone quite a lot of light on your numbers this time around for the year ended December. What are the plans for this unit in the year ahead?

RIAZ HAFFEJEE: Well, I tell you, we are very proud of our energy-storage vertical, because the three companies that are involved in making automotive starter batteries – that’s First National Battery, Mutlu and Rombat; Mutlu in Turkey, Rombat in Romania – have really performed exceptionally well in all areas of their business, whether in the OE business, or in aftermarket, or in exports, or in industrial for that matter. I think the volumes that they showed in all areas, growth in all areas, being able to hold their margin in all areas, and really with many of the challenges we face – not just South African challenges, but the challenges we faced in the Turkish economy and the Romanian supply [situation] – I think we’ve done exceptionally well and the teams have performed quite well. We see similar demand this year as well.

So overall I think energy storage really outperformed our expectations last year. [It] really contributed more than three quarters to our financial performance in 2021. So we’re very proud of the teams there.

FIFI PETERS: All right, Riaz, we’ll leave it there for now. Thanks so much for your time. Riaz Haffejee, CEO at Metair.

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