Good afternoon, ladies and gentlemen, and welcome to the Barloworld pre-close trading update conference call. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please signal an operator by pressing star then zero. Please note that this call is being recorded. I would now like to turn the conference over to Dominic Sewela. Please go ahead, sir. Good afternoon, everybody who's online, and I have with me the key areas of Barloworld from the operational side, Chris, very happy CEO of the Ingrain division, together with Emmanuel Leeka, who is the CEO of the Eurasia. I also have Steven [Mataro] stepping in for Andronicca, who's traveling, and in the room, I, I'm sitting with Nopasika, the FD, as well as Investor Relations, you know, you know, Nwabisa Piki. Just to give you sort of a highlight, I hope most of you have had an opportunity to review the trading statement that we did this morning. You know, it's definitely been pleasing to release, you know, those results, you know, notwithstanding the challenges that we are facing in terms of the headwinds from the geopolitical challenges, just overall inflationary environment which we operate under. Generally, you know, the global economic outlook. But I must say that what has been pleasing is to see, you know, double-digit revenue growth, about 15% growth for the group, largely driven by Southern Africa. Steven, you know, or myself, you know, could cover that later on. Where we've seen, you know, 34% increase on the revenues of this business. The order book has been very strong. You would have seen in the first six months, you know, we had to, you know, invest more in working capital with a view of actually delivering the bulk of that, you know, in the second half. And we're seeing that, you know, delivery taking place. I mean, we, we know, we are close to, we have got two more days of trading, for this month. But I guess the eleventh month give you a sense of where, you know, we are in that business. What's also pleasing to see, Mongolia coming very strong, following the closure of the borders last year. So, you know, the base will be low, but I guess, you know, there was a lot of drive to actually, you know, increase revenue in that business, but also, you know, overall margin realization in both Mongolia and, and, our VT business has, has been pleasing. You know, also understand that our VT operation is challenged by, you know, the war between Russia and Ukraine, and that has, you know, led to sanctions being imposed, you know, as of the month of, you know, I think it was July. You know, I had an opportunity to go to Russia, you know, and seeing our employees and meeting some of the key customers there. And I had an opportunity to go to Mongolia as well, you know, it was very interesting to see how committed our employees are in, you know, working in very tough conditions. You know, there's been most functions of our customers, so therefore, those function- customers we can't, you know, trade with. But notwithstanding that, you know, the team is focused on making sure that they optimize the business, you know, as well as making sure that, you know, where it's possible for them to trade, they do so in a profitable way. And I guess, you know, when you come back home to South Africa with our Ingrain business, you know, we've seen a 12% revenue growth really on the back of, you know, commodity prices, you know, as well as our export business. You know, I guess, you know, in an environment where our customers are impacted both by, you know, just consumer confidence as well as, you know, load shedding, we've seen volumes there, you know, being slightly down, you know. But overall, if you look at, you know, EBITDA, it has been impacted by basically three things. You know, as you said, acquisition, that business requires, you know, investments, you know, in terms of, you know, CapEx, you know, hence the inefficiencies and the unplanned, you know, sort of, you know, breakdowns are largely due to the fact that there hasn't been investment, but, you know, been tackled. And we've invested in making sure that we have the right skills in the business, you know, and hence, you know, you see, you know, the reduction of you know EBITDA on a comparable basis. But what's pleasing is to see that our covenants are in place, you know, the only one which has moved slightly downward is really likely due to the, when you look at our interest cover, we are operating in an environment where the interest costs are high. So I'm just gonna pause there and allow the questions, you know, to come in, and I'll either answer the question or direct it to whoever, you know, may be appropriate. You know, yeah, I'll stop at that point. Thank you, sir. Ladies and gentlemen, if you would like to ask a question today, please press star and then one on your touchtone phone or the keypad on your screen. If you decide to withdraw the question, please press star and then two to remove yourself from the list. Again, if you would like to ask a question, please press star and then one now. The first question we have comes from Paul Steegers from Nedbank. Please go ahead. Yeah. Hello, everyone. I hope you can hear me. I had a question on Equipment Southern Africa. Obviously, you know, fairly robust performance in terms of revenue growth, consistent roughly with the first half, but the margins have been under a little bit of pressure due to mix, et cetera, and profits therefore, in the second half may be down in round terms, year-on-year, and the order book has obviously reduced as you've worked through those orders. So as you look into next year for Equipment Southern Africa, are you still confident that that business can grow top line? And how do you see the margin development, you know, with mix and hopefully after sales then becoming a bigger part at higher margins? So maybe some color on Equipment Southern Africa, but looking forward 12 months. Thanks. Yeah, you know, thank you very much. I think Steven is on the line, but before he comes in, I think we've had, you know, two years of machine sales growth, you know, in an environment where, you know, that was underpinned by commodity prices and, you know, the confidence of miners, you know, acquiring, you know, or replacing on machinery. And as that gets to moderate, you know, you not -- we would not expect the same, you know, growth rate, you know, in the following year. But our view is that, you know, when that happens, the mix starts to change because, you know, our, our margin is really linked to, to that mix because, you, you know, we then will start getting more parts business because the, the equipment will be running. Our view is that, you know, production, you know, on the mines, notwithstanding the commodity prices, will still continue because, you know, whether it be overburden removal and also, you know, you know, mining the ore itself. You know, but I guess, Steven, do you wanna give more color to, to the question that Paul has raised? Thanks, Dominic, and thanks for the question, Paul. Certainly, the outlook for next year for our business, coming out of such a strong year, is still positive. But more so, coming from the aftersales business rather than prime equipment sales. As Dominic has alluded to, we definitely do still see that a lot of our customers will continue working their fleets. And the commodity prices have sort of been stable to support production, to keep going, in some of our major customers, on the mines. In terms of how that will flow through to our margins, we still have a positive outlook in terms of our profitability, as you pointed out, that with the mix changing, and aftersales being a bigger contributor, that will definitely have a more positive tilt, on our bottom line margins as well. Thanks, Dom. Okay. Thanks, Steven. Thank you. Paul, does that answer your question? Yes. Thank you for that. Thanks. Thank you. The next question we have comes from Brent Madel from Absa. Please go ahead. Good afternoon. Just a question on equipment Russia, if I may. So after the first half performance, you know, I think the impression that I got was that you had worked through a lot of the new equipment inventory that you had. And it was effectively gonna be a much tougher second half versus to the first half. From the numbers that you released this morning, it seems as though the second half has held up reasonably well. I would assume part of that contribution certainly would have come from the aftermarket parts side. But I wonder if you can just speak through the second half performance in Russia, also just in context of having less new equipment inventory at the start of the second half. Thank you. Yeah, I guess before Emmy comes in, you know, because, Brent, thanks for the question. You know, having been there, one of the key issues that we did, Brent, you know, because we argue that, you know, in terms of primary machines, we are not gonna see much, and that has been the case. If you look at the margin presentation, largely it comes from the aftermarket. And, in preparation of this, we did stock up, you know, a lot of inventory, you know, from other dealers, you know, as well as Caterpillar, you know, before they basically depleted the stock. So... And we are continuing to supply, you know, on that side. But Caterpillar also, you know, was still able to supply, you know, SEM. But SEM, remember, it's not like a mining type of equipment, it's more construction. So that is not really utilizing, you know, a lot of you know, parts, you know. But I think in essence, Emmy can just talk about, you know, what you see from an outlook point of view. Emmy? Yeah. Thank you, Dominic, and good afternoon, everyone, and Brent. As Dominic indicated, in terms of the prime product, we managed to maintain the run rate and the momentum towards the end of this financial year. But also what helped us a lot is the aftermarket, which with good margins coming through, we saw that you've seen a significant decrease overall in terms of the top line. But because of the mix and the aftermarket being stable, we are seeing the operating profit holding up and then also a very good- ... uptick in terms of the EBITDA contribution. So, as indicated, unfortunately, with the prime product Caterpillar, as we have previously announced that we will continue in terms of the SEM. Unfortunately, as from August, we got that feedback from Cat. They will not be supplying SEM into the territory. We are able to stock up enough as well until deliveries until December, and then we are sourcing most of our parts as well as the SEM across, in making sure that across the territory to be able to support our customers. So going forward, we do have enough stock to be able to sustain us. But also what is helping us in terms of the performance, is also re-looking at the structure internally to right size, to make sure that we restructure the company based on the current top line, and also the challenges that we're having with other customers that we are losing due to the sanctions. I hope that answered your question, Brent. If I can ask a follow-up question on that. So, if I look at the second half performance, based on what you're saying, it's not really the new base yet? Yes, it's not the new base yet, but continuously we're monitoring the situation. I mean, I can just give an example. One of our key customers that contributed close to about 30% to the business, we lost the customer base as of August. So that will also impact the business, but also what we are focusing on is other customers that are not necessarily sanctioned, and then we'll continue to try and make sure that going forward, we sustain in terms of profitability. Although we've seen leverage in terms of losing on the top line, but performance has been quite good. Thank you. But I think to your point, you know, because of this continuing sanctions, you know, that's why even though we gave that, that guidance that, you know, at worst case, it's a breakeven, I think we're still far, you know, from that, you know... And it'll be very interesting to see the development next year, if the war continues. Because I don't think necessarily even if the war were to stop, you know, the sanctions will be immediately lifted. It will take, there'll be a lag. So, our trading environment remains to be challenging, you know. So from a point of, of trying to figure out, you know, what the true outlook of this business, it'll be looking at March next year, because then you can almost say, take next last year out, because we're coming from a high base of a huge order book. You look at, at this year, you know, still trading off the inventory that we've been able to stock up, you know, and right sizing the business. And so I, I think to be realistic, you know, you, you, you look at sort of March next year, gonna give, you know, sort of a sense of where we could be with this business. But our view is that, you know, as the commitment, you know, we, the business must be self-funding. You know, the business must not be losing, you know, money. You know, that's the, you know, what we, you know, committed to. Thanks. Sorry, can I just ask a final follow-up on that? So just given how well Russia has done, is there any cash accumulation in country? I would assume you're more than covering, you know, your operating costs. Is there cash accumulation, and can you extract that cash? Yeah, you could. I mean, you know, and firstly, you're correct, because remember, we now don't have facilities, you know, with the international banks, you know, so we are using, you know, local, you know, banks, you know, to fund the business. But it's always prudent to fund the business on our own cash, because what we were trying to avoid is repatriating capital from, you know, from the center into that market. You can extract cash, but, you know, obviously, it's not as easy as previously, you know, and then Imi and the team, you know, are continuously looking at, you know, saying, "What is the optimal level that the business can be able to sustain itself with without, you know, trapping that amount of cash in the business? Understood. Thanks. Thank you. Ladies and gentlemen, just another reminder, if you would like to ask a question today, please press star and then one. The next question we have comes from James [Gillman] from Prescient. Please go ahead. Yeah. Thank you very much. Yeah, I just wanted to talk about the Ingrain business, which was the key weak area. The margin was around 10% in the first half, and it fell to 6% in the second half. And the commentary was fairly similar to the first half. Firstly, could you give us an idea of where the deterioration has come from, just in terms of whether it's in terms of volume or internal uptime? And then secondly, on the positive side, talking about Russia, could you give us some idea about what sort of size the aftermarket is now in Russia? And what sort of size the construction business is in Russia, because clearly those two have been changing quite substantially. That's it for me. Thanks. Thanks, James. Chris, do you wanna, you know, comment on the first one? Emmy, you wanna comment on the second one? Thank you, Dominic. Good afternoon, James and all. I think, yeah, just looking at the second half, I mean, the commentary is very much been the same, James. We did see some, you know, softness in the domestic market. ... We continue to see a, you know, you know, call it the mix shift away from the coffee creamer sector. So, you know, those volumes are lower, where we've had historically very good contribution margins coming out of those. I think we've had a mix in contribution. I think during the period we have. I mean, we've continued to sustain some of the efficiency losses that we've seen, which is a difference between, let's put it, our standard costs and our actual costs that we're seeing, you know, in the plants because of the breakdowns, et cetera, that we've had. We continue to, I think, have some difficult months going into, you know, into the second half of the year, which has, you know, which has impacted margins, and you're spot on, on the margin in the second half, which is unexpectedly much lower than what we would've had. Driven, like I said, about the losses that we've taken on the difference between actual and standard. We've also suffered with some of our agri product recoveries in that particular period, where we haven't been able to produce agri product, you know, as part of our separation, which has impacted the, you know, the co-product recoveries that we've traditionally had. And I think also our investments, you know, in the fixed cost line, where we've made much bigger investments in maintenance capital into the business to try and arrest some of the breakdowns that we're seeing have. You know, we made a much bigger investment there during the period. So I think largely, if you have a look at it, our revenue is up 12%, but our variable costs have gone up by about 18% in the period. I think that has resulted in a compression in contribution. Or let's put it, on the skills side, we're reasonably flat on skills and wages other than inflation, but we've continued to make the investments in maintenance and plant uptime in the business, which has also impacted the operating margin. Yeah, I think that's. I'm gonna leave the commentary at that point now, other than saying we obviously are addressing the issues through our CapEx program and, you know, continuing to change the practices around maintenance in the business. Thank you. Yeah. Thanks, Chris. Just on the contribution in terms of parts as well as, construction. Construction, I must say, when you compare it to the other businesses, it's, it's quite small, below about 5% or 3%, to be specific in terms of contribution, whilst mining, in terms of the top line, has been quite significant. But if you look at the aftermarket, particularly your question around parts, which is something that is sustaining us in terms of the mix, it's above, above, 60%. So currently, the bulk of it, in terms of the mix, comes from, from the parts sales. The mining clients that are not impacted by sanctions? Absolutely. That's correct. Yeah. Okay, James? Yeah. Thank you, Raj. If I could just do a quick follow-up in terms of the Ingrain business. I mean, looking forward to next year, what should we be looking at? Should we see 6% as the new base or the 10% in the first half as the base, or where you used to be, sort of 12, 13? Is that something which is achievable or is that not achievable anymore? Just to give us some idea of how serious the this fall is in terms of permanence, I suppose. James, I think from this point of view of guidance, you know, we'll probably average out the year at about 8%, maybe 8.5% on the operating margin line, you know, for this year. I do think that, you know, by March next year, we would need to show some progress on that, on that 8%. But if you were looking for a bottom line number, I would look towards that sort of 8%-8.5% number, and we'll revisit it, you know, towards the end of March. I mean, ideally, we set the business up and need to work that business at that contribution. We look at the operating margin, and as I said previously, you know, between 11% and 13% through the cycle. I do realize we've got a lot of work to do to get back there in terms of the persistent plant issues that we've been facing. Okay. Thank you very much. And then just, just finally, just on the Russian business, the... You mentioned, Emmy, that a large customer, that's 30% of sales, has gone. Is that-- Are there others like that? Just to give us an idea about the scale of where we're likely to be settling here. Yeah, I guess it'll be very difficult, you know, James, to try and predict, you know, because, you know, from a sanctions point of view, I've always said this is an ever-changing environment, you know. But fortunately, we have got a diverse group of customers in there. I mean, you know, the one that, you know, Emmy was talking about was of the size, you know, that's what's the impact. But we still have other, you know, smaller customers, you know, that are diverse, you know. And I guess, you know, that's gonna be an evolving one, you know, that I can't give you sort of guidance there as to, you know, you know, the size. You know, because I can say one thing today, and then tomorrow I hear another customer has been sanctioned, you know, so, unfortunately, this environment we find ourselves. Okay. So thank you very much, and thank you for the, for the color you're giving today. Thank you, James. Thank you. Ladies and gentlemen, just another reminder, if you would like to ask a question today, please press star and then one. The next question we have comes from Vilash Maharajh from Standard Bank. Please go ahead. Hi. Thank you. Good afternoon, everyone. Just going back to Equipment Southern Africa, if we could just get an indication of what the revenue and earnings mix was between South Africa and the rest of the Africa businesses. And in terms of the Equipment Southern Africa order book, how do we see that growing for the forecasted period? Is there any sort of what the strategy would be around growing that order book? Or is there any particular commodities that would be supporting the growth of that order book? Yeah, I guess, you know, that order book is very largely driven still by Southern Africa. You know, there is, you know, South Africa, rather, you know, there's still, you know, countries like Namibia, you know, to some extent, you know, Botswana, you know, and less so, you know, Zambia. So I think it's, you know, if you stick to the order book, and largely driven by the mix around, you know, mining, contract mining, and generally construction. Because with construction, you know, and E&T, we are able to actually have inventory that we can be able to supply. You know, so... So the guidance that we normally give, you know, you know, you know, South Africa still remains very strong in the upper 60s, in terms of, you know, contribution, you know, between the rest of Africa and South Africa. You know, yeah, I guess, you know, that's basically, you know, just the highlights that I can give at the moment. Sure. So thank you for that. Thank you, sir. Ladies and gentlemen, just a final reminder, if you would like to ask a question, please star and then one now. We'll pause a moment to see if we have any further questions. We have a follow-up question from Paul Steegers. Please go ahead, sir. Thank you very much. Hi again. Just wanted to have a better color on the associates. Bartrac obviously did very well, which is encouraging, great performance there. On NMI Durban South Motors and that business, how's the—obviously, had a weak first half. I presume it's still weak into the second half. What's the outlook there, and how are you thinking about that, associates longer term in terms of your relationship? Thank you. Yeah, because that's a JV, you know, Paul, you know, but obviously we do have, you know, some follow, you know, directors sitting on the JV. And, I guess if you look at, you know, the, overall South African trading market, particularly on the used car sales, you know, that has, you know, it has somewhat impacted the business, you know. So from a performance point of view, you know, on the second half, they're likely to be better than, you know, the first half, you know, relatively speaking. But I think, you know, the used car market still is, you know, challenged. And then some of the, OEMs, you know, they're not doing as well as others are. I mean, you know, if I think about Toyota continues to lead, and I don't wanna comment about the rest. But our long-term view has always been, you know, to be able to realize value out of selling the 50%, you know. Because remember, you know, Paul, when we did the transaction initially, it was during that, you know, COVID period. And our view, you know, that we didn't wanna sell it outright because we'd rather sell it to a partner with that we've already had for the last 17 years in the Akoo family. And our view is that they will be the natural buyer for this, you know, other 50%. You know, just have to make sure that the timing of exiting that 50%, you know, is far better than when we initially sold it, the first 50%. But it's definitely not a long-term hold. That's no, that's interesting. Thank you. So, if you think on that potential then divestment, are we talking sort of, you know, near term, one year kind of outlook? And if so, what would a disposal do to your, you know, return profile? Would it... I suspect it would be helpful, clearly helpful. Just maybe some color on that timing and returns. Thanks. Yeah. I guess, you know, when you're dealing within a market like we find it very difficult to give the timing, but certainly not one year, you know? So it will be something, you know, longer than one year. And I don't wanna commit to saying, you know, two years, and then it becomes two years. Because I prefer that whatever I commit to, I deliver on, you know. So currently where I'm at, you know, I don't think I'll see anything realizable, you know, where in a year, because I think there's a lot, you know, still to go through in South Africa in terms of, you know, elections coming through next year, you know, the consumer confidence. You know, therefore, I say if we go through that, then one is able to see, you know, that, you know, it's a pricing issue for me. You know, that, what pricing am I comfortable with? You know, to what extent, you know. So the business is not really draining in terms of, you know, us putting, you know, capital in the business. So I'm comfortable, but however, if I were to realize, you know, north of what I sold the first 50% on, you know, I'll be fairly comfortable because that is very helpful. You know, if I were to deliver, you know, to realize that value, in the current environment where interest rates are really high, you know, paying down the debt, you know, would deliver significant value if you look at where the cost of funds are, you know? So, yeah, I think, you know, when we have our conversations again in November, fall, we can revisit that. I don't think there's going to be much change between now and then, but let's see, you know, where we stand then. Thank you, sir. Thank you, sir. We have a follow-up question from Brent Madel. Please go ahead, sir. So I just wanted to ask a quick question just in terms of your update on the working capital. So working capital utilization ticked up in the first half of the year, and if I understood correctly, the intention was for that working capital utilization to decline quite significantly in the second half of the year. It seems as though that didn't happen. I don't know if you can just talk around the reasons for that. It has happened to some extent. I mean, remember, you compare, you know, it's just, you know, that sets out and still, because we still have an elevated order book, you know, Brent. Because remember, we deliver and, you know, so the orders, you know, to supply cycle for Caterpillar is pretty tight, you know, because we have to place orders, you know, and with a view of being able to deliver. And we will give another update, you know, for the month of September, because we continue, you know, we also continue to receive, you know, orders, you know, and then, you know, and that order book, you know, is likely to be slightly elevated or about the same level with F. So, you know, that's one. You know, so but obviously, you know, because you're talking about month closing, end of August, you know, sometimes some customers would have paid, you know, after the, you know, the month end of August, so we wouldn't have captured those. But you're likely to see that in September, because we're delivering right through, you know, to the month of September. So you definitely see that unwinding. But take into account what I'm saying, that, you know, it's if now we're ordering, you know, for the next six months, you know, and so that continues. But I think, you know, to my point earlier on when I was talking about commodity prices, you're seeing that top line moderating somewhat. I don't think you can expect that, you know, we'll be sitting at, you know, an order book about ZAR 5 billion, you know, in Southern Africa. Can I possibly just extend my question? So- Yeah. Over the last couple of years, we've had an order backlog just because of supply constraints. As you look at the order book today, do you have an idea of whether that order book still includes some level of order backlog because of supply, or have we largely cleared away the majority of that backlog because of the supply constraints? There's still a bit of some supply constraint in terms of certain models, Brent. You know, and you know, it's something that Caterpillar continuously is addressing, but significantly better than last year, to be honest with you. So that is the element of that. The other element is just mainly, you know, where we're sourcing some of these products. You know, if you're sourcing from the U.S., the lead times still tend to be longer, you know. So you end up having to pay Caterpillar, you know, before you actually get the product, let alone invoicing the product. So you still have a bit of inefficiencies in that regard, that your working capital cycle tend to be extended largely due to that, you know. But overall, you know, we've seen some improvement, but there's still some stickiness in terms of not being where the supply chain should be, you know, overall, for Caterpillar. Great. Thanks very much, Dominic. Thank you very much, sir. Ladies and gentlemen, there are no further questions at this time. I will now hand back over to Dominic Sewela for closing comments. Please go ahead. Thank you very much. As always, you know, we appreciate, you know, the attendance to this, you know, we will be releasing our results on the twentieth of November. You know, we're likely to see some of you in that. And as I said, you know, you know, the trajectory, you know, for me is that, we should be in the same region, you know, in terms of the revenue growth, but people give more color, you know, specifically to some of the, the operating details of the business. Because I think this being a trading update, you know, we give directionally where the business is, is, is going, and then, we certainly would try and, you know, see if we have better visibility on some of the questions raised on Russia. As I said, I don't expect much change, but it's important to say, you know, the focus is making sure that we continue to monitor, you know, the strength of our balance sheet and, you know, focus—I'd rather focus on organic growth, you know, and but, you know, doing so, you know, with the funding that is reasonably priced. I think you've seen us trying to close out more expensive debt and renegotiating, you know, from a pricing point of view, you know, better there. But overall, having executed the strategy and unbundling Avis, you know, getting rid of our motor retail business and logistics, certainly has put us in a better position. I think Chris has spoken, you know, nicely to the challenges within Ingrain, and our view is that, you know, we'll see the benefits of the investments that we're making, this year. And those goals should be translating into operational efficiencies. And as the talent gets bedded down, you know, you're likely to see, you know, moving towards the target, you know, guardrails that, you know, we want for the business. I think on that note, thanks, everybody, and you all have a safe and lovely afternoon. Thank you. Thank you, sir. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.