Metair Investments, the JSE-listed automotive components and energy storage manufacturer, is taking steps to "EV proof" the business and is backtracking on initial plans to split the group in two.
Metair CEO Riaz Haffejee confirmed last week that the original plan was to sell the energy storage division and release shareholder value but admitted they are now reviewing that process because of changes that occurred during COVID-19 that could impact that decision.
The changes Haffejee refers to are the new timelines for green energy and green manufacturing announced by regulators, particularly in Europe, which has resulted in global vehicle manufacturers advancing their plans for electric vehicles (EVs) by about four to five years.
Metair still largely produces liquid acid batteries at its three energy storage facilities - First National Battery in South Africa, Mutlu Akü in Turkey and Rombat in Romania.
Metair’s corporate webpage details the group’s vision: “Our mindset is to accept the EV challenge and the possibility of a future 100% EV-production scenario and then to plan the group’s path to real EV relevance and ‘EV-proof’ the business.
“From that point, we can take action to enhance our strategy to facilitate a smooth and sustainable transition to EV reality.”
Haffejee said Metair has access to technology and intellectual property (IP) that could lead the group into a very good direction in the future. The company completed the development of a lithium-ion production facility in Romania at the end of 2019. It was unable to commission it as planned because of COVID-19 and is now expected to produce the first cells in the fourth quarter of 2021.
Sjoerd Douwenga, Metair’s chief financial officer, said the group wanted to use this plant to complete the development of its IP and needed to use it to secure the OEM business.
However, Douwenga said Metair did not want to invest any capital in new technology if it was not certain of offtake agreements. Haffejee rejected suggestions that a change to new technologies by OEMs posed a threat to Metair’s liquid acid battery business.
He believes there will be growth in the lead acid battery market worldwide for at least the next 10 years and the switch to EVs will only gain traction from 2035.
Haffejee said electric vehicles currently accounted for only some 15 million of the about 1.4 billion global vehicle parc but EVs’ share of the market will probably grow to about 20% by 2030 through a shift to hybrid or fully electric vehicles.
“We are really well positioned to take advantage of that gradual change because that supply chain is our speciality,” he said.
Metair last week reported a 66% reduction in headline earnings a share to 148 cents in the year to December 2020 from 336 cents in 2019.
Haffejee said COVID-19 disrupted Metair’s business in the first half of its financial year, especially in the second quarter, but started to recover in the third quarter and made “a great recovery” in the fourth quarter.
Volumes in both the automotive components and energy storage vertical were probably the same or slightly better than 2019, and the group has started the 2021 financial year positively, he added.
Metair reported a headline loss per share of 56 cents in the six months to June 2020.
A change in the timing of vehicle launches because of COVID-19 has resulted in a shift in the group’s capital expenditure from 2020 to 2021.
Douwenga said the good thing is that all its automotive component projects are still confirmed and it did not lose any projects because of COVID-19.
However, Douwenga said one or two of the projects were delayed, the most significant of which is the Ford South Africa project, which was delayed by two to three months.
Douwenga said a total of about R200 million in capital expenditure that should have been spent in 2020 has rolled over to 2021 and at R1.3 billion makes the year a bit more capital intensive.
“But the good thing is that it’s all [capex in] volume-up opportunities and also increases Metair’s market share, so we’re investing in our growth for the future,” he said.
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