JSE-listed automotive component manufacturer Metair Investments is confident a business opportunity it has secured that will create 3 200 new jobs, most of them in South Africa, will still materialise and has not been destroyed by the coronavirus.
“We don’t believe the opportunity has gone away because of the crisis. It might be delayed a bit but it’s definitely not gone away,” said Metair CEO Theo Loock on Monday.
Loock added that any delay was not only in Metair’s hands because it is a customer project but they would prefer to enter into these capital-intensive projects in a period of stability.
He said these projects are not necessarily linked that much to market demand issues because they involved planned new product launches, but their preference is for a delay of three to six months.
Loock said 80% of Metair’s almost 7 000 employees worldwide are in SA and this opportunity will grow that 80% by 3 200 employees.
Apart from SA, Metair has operations in the UK, Germany, Kenya, Romania and Turkey.
Metair however confirmed on Monday that its operations in South Africa, Romania and Germany are all closed due to the coronavirus pandemic.
In the UK the company is operating remotely with essential services only, in Kenya it is operational with strict social distancing, and in Turkey it is operating at 50% capacity with strict social distancing.
New vehicle boost
Metair confirmed earlier this month that group companies had been successful in securing major contracts arising from the new vehicle launches planned to service the export and local markets over the next three years.
These contracts are for almost all the original equipment manufacturers (OEMs) with a manufacturing presence in SA, including Mercedes-Benz, Toyota, Ford, Nissan, Volkswagen and Isuzu.
Loock said the biggest impact will be at Hesto Harnesses, where Metair secured the supply of the full spectrum of wire harnesses to a range of new customers.
“This could see employment rise by 3 200 employees with a capital investment of approximately R500 million, securing turnover over the planned model life period of seven years of between R12 billion and R14billion.
“The final impact will depend on model launch volumes that are under discussion with customers and would be disclosed to the market when finalised,” he said.
In a statement issued on Monday, Metair said that in light of the devastating economic impact, weakened trading conditions and extraordinary cost related to Covid-19, Metair’s earnings per share and headline earnings a share for the six months to June 30 will reduce by at least 20% compared to the previous corresponding period.
Metair also announced that its board has decided to postpone the payment of the 120 cents per share dividend declared for the year to December 31 2019 to preserve the company’s liquidity “given the uncertainty as to the duration and the extent of the impact that Covid-19 will have”.
It said the company has sufficient liquidity and facilities to operate and has confirmed all existing banking facilities.
Loock stressed on Monday that Metair’s fundamentals support the group in surviving a crisis.
He said Metair has, since its establishment, decided to own and operate all its properties because it did not want to be in a lease, leaseback and sale, or a lease or rental position when times are tough.
Loock said another fundamental is that, in a crisis, the crisis is either going to enhance or worsen your business case.
“Globalisation is going to be affected by the coronavirus and they are going more towards a regional geographical manufacturing base than a global base.
“That is positive for us post the crisis,” he said.
Renai Moothilal, executive director of the National Association of Automotive Components and Allied Manufacturers (Naacam) – which has more than 150 member firms in SA that provide employment to more than 80 000 people – said on Monday that almost all Naacam members have shut down production.
“The impact is naturally negative given that there isn’t long-term certainty of what vehicle production requirements are going to be like, even when we come out of the lockdown.
“There is great concern that the numbers that were initially projected and the installed capacity, which is the basis on which investments were made, is probably not going to realise.
“I’m fairly confident there is going to be some contraction within the sector overall,” he said.
Moothilal said this contraction will apply to a combination of production volumes, business failures or closures and job losses.
He said it is a big concern for the entire sector that the impact of Covid-19 will negatively impact one of the major aims of the new Automotive Masterplan, which is to deepen and broaden the automotive components sector.The Automotive Masterplan is effective from next year.
“The sector as a whole, both OEMs and large tier-one component manufacturers, have spent a lot of time and effort over the last couple of years in trying to find alternative sources that deepen localisation options.
“On the back of that is, of course, volume support and if that volume is not there anymore, it’s a very likely assumption that the tier-two base will take a lot of pain,” he said.
Moothilal said it is likely that black-owned manufacturers will come under the biggest pressure but this is not a reason for the sector to not continuously look to support the transformation objectives.