Barloworld Ltd. (BAW), a South African distributor of Caterpillar Inc. (CAT) equipment, expects spending by mining companies and governments on infrastructure to boost Africa sales of the machinery by more than 10 percent a year.
“We are still in the infancy of growth of Caterpillar products in Africa,” Barloworld Chief Executive Officer Clive Thomson, 47, said in an interview in Johannesburg on June 6. “Anything that is going to require infrastructure build -- roads, dams, bridges, ports, harbors, airports, railway networks, new power grids -- all requires in one way or another our construction equipment.”
Sales of the machinery will probably grow by a percentage in the “strong double digits” over the next five years, Thomson said.
Barloworld sales of Caterpillar equipment rose 30 percent to 25.3 billion rand ($2.5 billion) in the year through September compared with an 18 percent increase in total revenue, according to the company’s annual report. Barloworld has exclusive distribution rights with the Peoria, Illinois-based manufacturer of heavy machinery in Russia and eight African countries including Zambia and Mozambique.
Barloworld, which also operates car dealerships and a logistics unit, seeks to take advantage of new mining projects in commodity-rich African countries to sell equipment. The company has won a 1.1 billion-rand deal from Vancouver-based First Quantum Minerals Ltd. (FM) for its Zambia copper projects and a 1.2 billion-rand contract from Swakop Uranium to supply drilling and loading equipment in Namibia.
Sales of Caterpillar machinery, including spare parts and services, have a profit margin of 7.2 percent, higher than 4.5 percent for Barloworld’s automotive and logistics division, according to Thomson.
Net income for the six months through March rose 50 percent to 643 million rand, the company said in a statement on May 20. Revenue increased 11 percent to 31.3 billion rand, driven partly by the contribution of sales from local distribution units of Bucyrus, bought from Caterpillar in 2012.
Barloworld is countering the impact of a weaker rand as its international operations trade in U.S. dollars, Thomson said at the time of the first-half earnings announcement. The rand has fallen 17 percent against the dollar this year, making it the worst performer of 16 major currencies tracked by Bloomberg. It traded 2 percent lower at 10.1589 by 5:31 p.m. in Johannesburg.
Barloworld shares have declined 4.6 percent this year, compared with a 4.3 percent gain on the FTSE/JSE Africa All Share Index. The stock fell 1.1 percent to 83.50 rand by the market close.
Barloworld’s automotive division manages 45 car dealerships in South Africa, selling vehicles from manufacturers such as Mercedes-Benz Automobil AG, Bayerische Motoren Werke AG (BMW), Audi, Volkswagen AG (VOW) and Toyota Motor Corp.
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