Good day, ladies and gentlemen. Thank you for your patience. Welcome to the Barloworld's pre-closed trading update. All attendees will be in listen only mode. There will be an opportunity to ask questions when prompted. If you should need assistance during the call, please signal an operator by pressing star and then zero. Please note that this event is being recorded. I would now like to hand the conference over to Mr. Dominic Sewela. Please go ahead, sir. Thank you very much. Good afternoon, everybody. Those that are on the line, I must apologize. We've had a glitch, you know, on our side because we couldn't, you know, hear, you know, the call, and there are some of my colleagues that are not connected. So if you could just pardon us, they'll try and connect. In the meantime, I think it's important that I point out, you know, that we've issued the voluntary trading update earlier in the morning, you know, for five months to the February 28th. You know, I'm pleased to say that, you know, when I look at the results for that period, you know, taking into account the challenges that we all have as business people, you know, whether you look at geopolitical issues, you know, regional issues and specifically, you know, certain challenges in South Africa that, you know, I think most of you are familiar with those, you know. You know, these results are a good set of results, you know, for this trading period. I think it's important to note that when you look at the revenue growth, if you were to exclude Russia, you know, you know, out of those numbers, you know, on a comparable basis exclude it previous year, and now, you know, the core business is up 38% on the revenue line. I think you could work it out in terms of the details that we've provided, you know. The other issue that's important is that, you know, we have succeeded in, you know, executing the strategy to pivot, you know, out of the automotive and logistics business, you know, and that was the last action was really, you know, the unbundling and the listing of Avis, you know. You know, having done so, it leaves Barloworld with the two business being, you know, equipment distribution as well as the Ingrain business, you know. With that, I think it is significant, you know, because what we're trying to also do is to ensure that, you know, in terms of our fiscal discipline and being able to manage, you know, our balance sheet, you know, we've been able to also, you know, take a lot of action around the issue of allocation coming through, you know, in terms of the, you know, the results, you know, whether you look at where we are in, you know, in terms of a funding, you know, requirements. I think it's important for me to also, you know, highlight the fact that, you know, Mongolia has rebounded, you know, following the opening of the borders of China. I think, you know, we're seeing gold coming through very strongly, you know. Importantly also to also highlight Southern Africa because for a while we did talk about, you know, the hours, you know, in terms of the machines, you know, in the fields and that there's gonna be a replacement CapEx required. We've seen that coming through in terms of, you know, the order book, you know, for Southern Africa, you know. I think in Ingrain, you know, relatively speaking, you know, albeit the volumes, you know, are down, but you know, revenue is up in the business. I guess, you know, just given the fact that you, most of you would have read the trading update, I would like to open up to questions, you know, so that you can then be able to engage, you know, yourselves on specific questions that you may have. You know, Melissa, are we able to? We're just waiting for to join via the alternative line as well. Okay. All right. We'll be all in a minute. Yeah. Yeah. We're ready to take any questions, you know, that could be on the line at the moment. Thank you very much, sir. Ladies and gentlemen, we'll now be conducting the Q&A session. If you would like to ask a question, please press star then one on your telephone keypad or the keypad on your screen. A confirmation tone will indicate that your line is in the question queue. You may press star two to exit the question queue. Just a reminder, if you'd like to ask a question, you're welcome to press star and then one. The first question comes from Paul Steegers of Nedbank. Yeah. Hello, Dominic. Can you hear me? Yes, I can hear you. Okay. Thanks, Dominic. Yeah, just a quick one on Russia maybe for you or Quinton. Obviously a good performance year to date and still profitable even though revenue's under pressure. I'm just wondering if you can take us through the sort of the income statement there in terms of variable costs that have been taken out, fixed costs, you know, in terms of personnel, branches, and what are the expectations for the second half, you know, when I presume you'd now be quite confident of your break even forecast for the full year for Russia. I'm just wondering, second half, you know, at what stage, given the sanctions, would you not be able to sell any of the product and it's more sort of refurbs, aftermarket? Related to that question, are you allowed to sell other brands? Will Cat simply allow you to maybe be able to sell other related brands given the sanctions on their products? Thank you. Okay. Thank you. You know, I'm not too sure that Quinton has been able to log in following the challenge. I think, you know, if we just look at, you know, the performance for the five months, you know, certainly, you know, the business has therefore above our expectation, largely due to the actions that we've taken, you know, around costs, you know, because as we did say, we're aiming to break even in that business, you know, there's been some of natural attrition, you know, where, you know, we've had employees resign, you know, for other, you know, opportunities. I guess maybe they're anticipating that, you know, you know, there won't be a much opportunity in that regard. I think, you know, in terms of competitor products, it's important that, you know, most of the competitors, you know, are save for Chinese competitors. We are all affected by sanctions, you know, in this area. From a product point of view, we couldn't, you know, distribute competitive product, you know, in Russia. Caterpillar would not allow us, you know, because we are a sole, you know, Caterpillar dealer and the distributor in that market, you know, therefore we can't, you know. We can only distribute, you know, what we call SEM, which is a product that's manufactured out of China. That product is mainly construction, you know, related product. It is not mining related, you know, therefore, you know, when you look at the size of that market, it's relatively small. When you look at the performance that you're seeing here, part of it is really on the parts side, you know, and the aftermarket where you know, we are selling, you know, parts and service, you know, to the customers that are not impacted by sanctions. You know, we have, you know, you know, bought as much parts as we could, you know, and we are able to realize good margins, you know, out of those, the parts business, you know, in the territory. I think, you know, to an extent that, you know, you know, if, you know, the sanctions, you know, get further tightened, you know, one cannot preclude, you know, a situation where, you know, you know, Caterpillar can say we can't operate in the territory because we are a distributor, you know, of Caterpillar, and we are a licensee. Therefore, you know, we are tied, you know, to whatever, you know, Caterpillar, you know, could do in that territory. You know, currently we are able to trade in terms of, you know, as I said, SEM. You know, we are able to trade, you know, parts, albeit it's very difficult logistically, as you can imagine. You know, the trade routes, you know, are not quite easy to get there. The team, you know, also has to make sure that the attention to detail, you know, in terms of the compliance is met at all times. Those are some of the challenges that we have. Under the circumstances we're saying, you know, we will continue to do that in as far as we could. The commitment that, you know, argues that, you know, we would look at this, the worst case is that we break even in this business. We'll continue to monitor that. At the outlook, you know, if nothing were to change, but it's a dynamic situation, you know, we are likely to be slightly profitable. You know, if I now look at, you know, the outlook for the balance of the year, you know, or, you know, probably, you know, to break even. I think the prospects where we currently sitting looks slightly better than what we had forecasted in terms of the break even situation. I hope I've covered, you know, your question, you know. I don't know if there's anything that I've left out. Yeah, no, I think that's useful. I guess it's very difficult to predict what's gonna happen with this, with this conflict, right? You know, given what you know now, if this conflict carries on for another 12 months, you know, realistically, will you be able to break even, you know, next year, next fiscal year as well? Are there ways you can do that? Because revenue will probably keep coming down. I'm just trying to get a sense, you know, at some stage that this business realistically or potentially become loss-making. Then when do you take the decision to exit, if at all, or do you just take it on a 12-month rolling basis to see what happens? Thank you. Yeah. I guess, you know, from, you know, and I've said this previously, you know, last year, you know, when the war broke out, you know, that we tend to take a long-term view and that we've operated in other regions, you know, you know, like Mozambique, you know, where, you know, for a long time we try and maintain a break even, you know, situation in operations where, you know, we are a license holder, and we believe, you know, when you look at the fundamentals, you know, in terms of endowment, you know, of what a country has in terms of, you know, the mineral resources, you know, opportunities long term, you know, we are able to, you know, to have that whole pattern. Our intention is definitely not to lose money. You know, if we start losing money, we'll definitely take drastic actions, you know, to that effect. As hence we gave, you know, the guidance that, you know, a break even situation, you know, is what, you know, will happen. I mean, you know, like any business person, I can't hold a position where, you know, once there is a risk to loss of life, you know, risk, you know, to you know, to follow wars, you know, that we will hold, you know, a particular. We'll obviously take a view as things progress, you know, because it's very difficult to predict, you know, two years forward in this type of situation, you know. We're hoping that, you know, things could be better. You know, we will take the necessary action as and when. Definitely argue that we would like to stay in territories, you know, in these emerging markets where we had a licensees as long as it is, you know, practical, you know, in those environments. Quinton, I don't know if you've joined the line. Is Quinton able to hear me? Yes, Dominic. Good afternoon, everyone. Yeah, I can hear you, Dom. Okay. You want? Maybe you wanna just give your take. Yes. I think, Dom, you've actually summarized it, very well. I can't really, add maybe just to say that, you know, based on the current, situation in Russia, there's still freely dollars available. You can exchange between dollars and rubles. The SWIFT system for non-sanctioned banks are still operating. I think our business in Russia is still completely self-funded. You know, there's no financial support, from the group. So, you know, we managing it is as is today. I think Dom has alluded to what we expect in the next six months, and I think next year, you know, we will have to constantly reset, as the sanctions, evolve. Maybe, you know, just to summarize, the sanctions. From our perspective, we need to comply with all U.K. sanctions. That's without a doubt. We have to comply with U.S. and E.U. sanctions only where there's a nexus. That means, you know, there's a lot more a leeway from that perspective. However, we need to consider the U.S. re-export restrictions. Whenever there's a controlled product that moves and it's from U.S. origin, there's a certain percentage then that product, you know, we cannot move across the border. Which then basically takes the whole Caterpillar product line out except for the Chinese product that Dom has spoken about. Dom, I can't really add any more color to that. Okay. Thank you. Thank you. Thank you. Appreciate it. Any other question? Thank you, sir. Ladies and gentlemen, just a reminder, if you'd like to ask a question, you'll want to press star and then one. Next question comes from Mark Dewar of SBG Securities. Good afternoon, gentlemen. Just two questions, if I may. The first one relates to Ingrain, the starch business. Could you comment how the so-called stage 5 and 6 load shedding may have impacted some of the efficiencies and the operation conditions of the equipment? Perhaps what has been the mitigating action of management in investing perhaps and undoing some of the bottlenecks. A last question regarding the balance sheet. I think the statement made comment about funding potential headroom of ZAR 16 billion. I assume that next year, the Zeda loan of about ZAR 1 billion also becomes available. Could you comment further on potential capital uses of that headroom on the balance sheet? Thank you. Let me get. If Chris is on the line. Chris, do you hear that question? Yes, Dominic, I did. Good afternoon, Mark, and good afternoon, everyone. Mark, if I look at the period under review, we did suffer quite a few efficiency losses, particularly in the month of February. If you compare our trading update with the outlook given at the AGM versus the month of February, we probably took about a ZAR 50 million hit on efficiency losses in the month of February alone. We were impacted there with some power dips coming through. I don't think we have an issue at this stage with stage 5 and 6 load shedding directly on the business. We did suffer from some plant reliability and some unplanned breakdowns in that particular month, which contributed quite heavily to, you know, to those losses that we experienced. It's quite a big swing year-on-year. If we have a look at some of the containment actions that we're putting in place, we are doing a, you know, further work on our energy supply security, you know, looking at alternative sources, solar supported by, you know, a potential for gas gen sets potentially. We'd also need to look at some, you know, battery backup to deal with load transitioning in the plants. you know, that is something that, you know, is in our longer term capital plan and, you know, we should see that those effects going to come through in 2024 for us. I think the one issue that we are facing though as well is when I look in our customer base, although, you know, we still have access to the electricity supply, the dips, notwithstanding, we are starting to see some impacts, and particularly on our customer base that is, you know, manufacturing out in this East Rand corridor, where we are seeing both power dips come through for an extended period of time. some of those customers are now also starting to experience some water shortages, you know. We've got these 12-hour water shuts which are starting to impact production and, I mean, and therefore some offtake in some of the mixed good market segments that we're seeing. Okay. Thank you. Yeah. Mark, I guess maybe, you know, just to answer your question. You know, you're correct in terms of the ZAR 16 billion headroom currently, you know. It's important to say currently, because remember when you have large, you know, order books, you know, like we have in our equipment business, you know, in the first six months, you're utilizing, you know, cash. You know, therefore, you know, you're likely to see that unwind in the second half. That headroom is gonna move up, you know. Fundamentally, you'll also, as you correctly pointed out, you know, you know, that, you know, a ZAR 1.5 billion loan that we made to Zeda, you know, it is, you know, slowly coming down, you know. In our view that by the end of September, the bulk of it should be out of our books, and it will actually give us a headroom. I think when it comes to what we then do, I think it goes back to the issue of capital allocation. I've outlined our capital allocation, our thesis, as we do what is in the best interest of the company when we look at various opportunities, whether we seek to repurchase shares, share buybacks. Alternatively, we look at paying down debt. Clearly, with the yield curves where they are at, you know, and when you look at, you know, cost of funds, you know, we will be continuously looking at the pros and cons, whether it is beneficial, you know, to pay down some of the debt, you know, because our debt profile in terms of the tenure is different. Obviously there are situations where, you know, we either have fixed, you know, loans and. You know, that will be an, a continuing assessment, you know, first and foremost. Our focus, you know, in terms of opportunities as you come, you know, is the bulk of the capital is gonna be on organic growth, you know, first and foremost. I think to an extent that there are opportunities, you know, that present themselves in terms of the two segments that, you know, we have now. We will look at those, you know, and but it will be, you know, to see if ever, you know, are they attractive or not, you know. That's basically what we will be using the cashflow for. We don't rule out, you know, dividends, you know. Because, you know, our dividend, you know, our policy, you know, it's intact. We've given you guidelines in terms of, you know, our payout ratio from a dividend point of view. Thank you very much. The next question comes from Brent Madel of Absa CIB. Yes, good afternoon. Good afternoon. Yeah, just two questions from my side if I can. My first question, just in Russia, my understanding is that you have leeway to sell pre-owned equipment. Just wanted to, first of all, find out whether you were able to source equipment and find a distribution channel into Russia with pre-owned equipment and whether that did have an impact on the results. Maybe if you can just give me an indication of whether that strategy continues to be the alternative. My second question is just on the Bartrac JV in the DRC. Granted that the performance was up in the comparable period, but it looks like it's tracking behind what you achieved in the second half. Looked like a stronger performance in the second half last year versus to the first half. I just wanted to find out whether the DRC is slowing down. Okay. No thanks. I'll ask you know, Quinton to comment on Thanks. Thanks, Dom. In terms of pre-owned, I assume it's used equipment. Yes, we have been successful to source some used equipment specifically from China. However, that's also a moving commodity. As sanctions is reviewed and refined, some of those products then also will be caught in the net and then, you know, we might lose traction and not able to buy that those types of equipment anymore. Yes, we have had success. We've bought quite a few pieces of equipment. It's not a major contribution to the result because it's relatively small. You know, it depends when if the sanctions change then that source will also be closed. Currently it is still open, although some of the product lines has been caught in, the January, sanctions net. Right. Thank you. Thank you. Emmy, you wanna comment on the DRC? Yeah, I have. All right. When you look at the anomaly in terms of trading, our first half is not as strong as the second half. Bear in mind also over the periods, especially in the DRC, there's been a lot of rains and impacted as well slightly the performance. However, our first half for 2022 was about ZAR 45.8 million, and then compared to what we have now reported of ZAR 62 million. If you look at the second half, it was quite strong. Thank you. Sorry. If I can just follow up a question. Just in terms of your guidance there, do you think it would be tracking similar to what you achieved in the second half? I'm just, again, just clarifying whether there's any softness in that market. We, as per the guidance, it will be a stronger, a better second half. Okay, great. Thank you. Thank you. Thank you. Sorry. No, go ahead, and we can take the next question. Thank you very much, sir. The next question comes from Kyle Cowan of News24. Hi. Good afternoon. I was hoping you could provide a little color of what happened in Equipment Southern Africa. There was quite a jump, just looking for a bit of for a few reasons. Thank you. Okay. Emmy, Steven, you know, Andronicca, any one of you can take that. Sorry, we're battling to hear. Sorry. You know, we just wanna have a color on the, on the Southern African activity, you know, that, you know, it was strong, you know. Yeah. Andronicca? Thanks. Thanks for that question. Yes, we have seen strong growth in all our regions. You know, South Africa, rest of Africa, country by country, all of them came strong. The main driver really for this growth, as you can see from the upgrades, is machine sales. You know we've been talking about the replacement cycle, customers, they're holding on cash, stretching the life of the asset. We're starting to see that coming through. However, there are different drivers country by country. In some countries, like Mozambique, for example, where we saw strong growth, the replacement component business was what drove the growth. That's why you see on parts and after-sales, you know, we are still tracking well above the benchmarks that Emmy mentioned earlier. That's that, overall, across the region. Thank you. Kyle, does that conclude? Yes. Thank you. Thank you very much, Kyle. The next question comes from Nhlanhla Nipho Nxumalo of 36ONE Asset Management. Hello, can you hear me? Yes, we can hear you, Nhlanhla. Okay. Good afternoon, everyone. I mean, a lot of my questions have actually been answered, maybe I can just ask on the M&A side, is it correct to say that it's not to say that you'd be looking for a new territory or anything when you talk about programmatic M&A? I'm talking about the equipment business. Just a second question. Could you maybe give us some color on the trend of finance costs? I mean, debt has gone up due to working capital, there's also the Zeda debt that's come out. I'm just trying to get my mind around, I mean, how that will trend this year. Thank you. Okay. You know, I think, you know, you know, we've said, Nhlanhla, in terms of, you know, the opportunity to get Caterpillar dealerships, you know, it's something that, you know, we'd welcome whenever it presents itself, you know. It's fairly difficult to know when those opportunities come about because, you know, we always say to Caterpillar, we wanna be the best in mind whenever there's territories, particularly in adjoining territories to where we currently operate, you know. So that's one. I think to an extent of, you know, opportunities, being available, our consumer business, we would look at those, you know. Any, you know, opportunities adjacent, you know, to where we operate in the equipment business from a services point of view, you know, we would look at such opportunities, you know, when they present themselves, you know. You know, I think, you know, I hope that's, that'll answer your question, you know, from that. You know, maybe, you know, on the finance side, Nopasika Lila, you wanna comment on that? They can hear you. Uh, Nhlanhla. So, just in terms of globally speaking, last year, in fact, on a sales and business financial year 2022, on average, we're looking at about 4.8% in terms of our total funding costs. With the move in this current financial year, we do project, well, it's not going to be easy, but we're looking around, I think your number should be around about 8.38% in terms of the percentage that we are looking at. Thank you. Those are the projected exceeds. Okay, thanks so much. Thank you. Ladies and gentlemen, just a final reminder. If you would like to ask a question, you're welcome to press star and then one. We have a follow-up question from Brent Madel. That's the CIB. Sorry. Just a follow-up question, if I can, on Equipment southern Africa. Up to this point, we've had a pretty strong order book because the supply chain has been disrupted for the last couple of years. My understanding is that the supply chain has improved. I would like to get a sense of, you know, given where commodity prices are and what trends we've seen over the last few months, where the demand is beginning to soften. You know, granted, you've had a good performance because your order books have been strong. I just want to get a sense of whether the order books are being replaced at the same rate that you're executing. Okay. equipment team, did you get that? Emmy? What was the question, Andronicca? Yeah. Maybe I'll start with the last comment on the order book. Up until February, we were able to replace the order book at the same rate as we are delivering the machines. You can see that reflected in the numbers, the ZAR 5.7 billion that we reported. So far, demand has been strong. Yes, if you look at, you know, the different segments, for example, in the Northern Cape, as we entered the last quarter of the calendar year last year, we were concerned about the softening iron ore prices, and we started seeing some recovery. The demand for coal, we expect that to continue because we're so dependent on coal in South Africa and the region. Looking forward, we believe that yes, the business is cyclical and there may be some softening as we saw in January, you know, the production output on copper starting to slow down a little bit. We always say that, you know, we are in the business of producing minerals that are so critical for the energy transition. Yes, even if there may be a slight slowdown, in the long term, we're expecting momentum to continue. We haven't seen much of greenfield projects in a long time. About two years ago, we started delivering on a greenfield project in Botswana. What is pleasing is that we're starting to see some activity although at a smaller scale. For example, Sasol is pressing ahead to develop that Alexander project in the middle of that region, the coal mine that will be supplying their operations. We believe that, if that project goes ahead, we'll be well-positioned to capture part of that opportunity. Zambia as well, there's a greenfield project that is gaining momentum. We are positioned there to deliver on that project when the time comes. Some of this will take about two years or so. Again, if you look at the rate that we are now starting to see equipment, that will help us even if there's a slowdown, we should be able to capture the aftersales business, which is more profitable. Great. Thank you very much. Thank you. Next is a follow-up question from Paul Steegers of Nedbank. Yeah. Hi, guys. Just coming back on the, Dominic, on one of your comments on the cash flow and the headroom. I just wanted to be clear on the Zeda business and the cash there. I think there was still ZAR 1 billion or so of cash to come from that. Is that, is that flowing in the second half or when is that coming through? Can you just explain that in a bit more detail, please? Thank you. Yeah. You know, I just, you know, I just want to, you know, level just to comment, you know, on the exact amount. The guys are actually, you know, paying us ahead, you know, what we were expecting in terms of the payment profile. You know, because we're trying to give them a chance to be able to finalize, you know, some of that debt raising from other banks, you know, taking security of vehicles. You know, level, you wanna just give, you know, more color on that? Is Lila here? Okay. You know, you wanna comment? Yeah. Thanks. Thanks, Dom. That's what has happened is, as Dom has indicated, the debt is currently contracted to end or rather they should pay Barloworld in December. That is the contract arrangement. Because of the performance and the continuous engagement that we've been having with the bank to assist, taking over the loan if possible or to reduce it as quickly as possible, we are targeting an earlier date than that December. I think Dom did allude to the fact that our target will be by the time we close up the financial year, that debt should be completely out of our books. That is what you're going to be seeing. Thank you. Got it. No, thank you. Thank you. That's useful. Maybe just a last question from me then, on Mongolia. As you said, and very well, we've seen some really good improvements coming through. I'm just wondering about the, the outlet there in the second half. You know, presumably the railway investments and everything that's been going in have yet to become operational, if at all. I'm just wondering, should we continue to see this kind of momentum in terms of top line? Is it sustainable and is the good margin improvement, is that sustainable as well for the full year and into FY 2024 as it stands? Thank you. Thanks, Paul. Quinton? Thanks, Dom. Paul, yes. I think maybe just on your comment on the rail project, that's been delayed. They expect, you know, that it will now be commissioned, you know, somewhere during the next six months. It's still coming, but there's been some delays and in terms of the delivery from Caterpillar in terms of the locomotive. That's still coming. I think the second half we'll see still a strong result. The margin's definitely sustainable, potentially even improving. I'm not from a prime product perspective, I don't think it will be equally as strong. From a parts and service perspective, it will be stronger than the first six months, hence the improvements in margins, anticipated improvements in margins. I think this year will be a good year for Mongolia. Hopefully, you know, as the Rio Tinto mine gets developed, you know, we will also be able to capitalize on those opportunities. Okay. Thank you. Thanks, Paul. Thanks, Quinton. Thank you. Ladies and gentlemen, it appears we've reached the end of our Q&A session. I will now hand over back for closing remarks. Thank you very much everybody for participating. You know, we will be, you know, releasing our results, you know, in our, in our interim results in May. We'll, you know, obviously, we say, you know, it's a very uncertain environment. I guess, you know, the biggest thing going for us from a Barloworld point of view it is, you know, the actions we've taken, you know, to focus on costs, you know, focus on capital, you know, allocation. You know, making sure that the fiscal discipline in terms of the having a very strong balance sheet, you know, is maintained. You know, because I think in certain terms of uncertainty, you don't want to find yourself wanting, you know, in terms of, you know, your leverage on your balance sheet. Because you can't take advantage of opportunities when they present themselves, nor can you know, maintain a particular course in the event there's challenges. I think where we're sitting at Barloworld, we're fairly comfortable with all the challenges that we face, you know, to say that I think, you know, the next, you know, 6 months, you know, is something that we would be, you know, relatively similar or better than, you know, what we have delivered. Thanks, everybody. Thank you, sir. Ladies and gentlemen, once again, thank you very much for your patience with the technical difficulties in the start. That concludes today's event. Thank you for joining us. You may now disconnect your line.