INTEGRATED ANNUAL REPORT 2011 GRI RESPONSES  

John Blackbeard (54)
Chief executive officer: Handling
BSc Eng (Hons)
Dip Bus Man
15 years’ service

Operating performance

  Revenue
Year ended 30 September
  Operating profit/(loss)
Year ended 30 September
  Net operating assets
30 September
Economic 2011
Rm
  2010
Rm
  2011
Rm
  2010
Reclassified*
Rm
  2011
Rm
  2010
Reclassified*
Rm
 
Southern Africa 1 141   912   76   42   457   369  
Europe 1 983   1 734   (2)   (26)   675   723  
North America 1 585   1 440   (2)   (19)   430   399  
  4 709   4 086   72   (3)   1 562   1 491  
Share of associate income         3   3          

* Reclassification of interest paid in the leasing business from cost of sales to finance costs.

  Petrol and diesel (ML)
Year ended
30 September
  Electricity (MWh)
Year ended
30 September
  Energy (GJ)
Year ended
30 September
  Emissions (CO2e tons)
Year ended
30 September
  Water (ML)
Year ended
30 September
Environmental 2011   2010   2011   2010   2011   2010   2011   2010   2011   2010  
Southern Africa 1.12   1.06   847   1 125   46 400   44 641   4 062   4 155   5   3  
Europe 1.70   1.74   3 115   3 412   87 898   94 147   7 116   7 637   22   26  
North America 2.40   2.26   4 632   4 944   96 542   95 908   8 263   9 623   18   14  
  5.22   5.06   8 594   9 481   230 840   234 696   19 441   21 415   45   43  

  Employee headcount
Year ended
30 September
  LTIFR
Year ended
30 September
  Fatalities
Year ended
30 September
  B-BBEE rating*
Year ended
30 September
Social 2011   2010   2011   2010   2011   2010   2011   2010  
Southern Africa 489   423   1.08   5.40           2   3  
Europe 1 256   1 244   2.48   2.40                  
North America 837   804   0.78   0.40                  
  2 582   2 471   1.70   2.28                  

* B-BBEE rating for South Africa only.

Leadership team

John Blackbeard (54) Chief executive officer. BSc Eng (Hons), Dip Bus Man. 15
Lex Knol (56) Managing director: Barloworld Handling Europe. BEng. 11
Alwyn Smith (46) President: Barloworld Handling United States of America. MPhil, BAccountancy. 16
Eugene Smith (50) Finance director. MA (Cantab), ACMA. 29
Rob Tennant (54) IT director. BSc, MSc, CPIM. 31
Phil Bastow (57) Managing director: Barloworld Handling United Kingdom. 3
Godfried Heydenrych (38) Director: Barloworld Handling Southern Africa. 10
Steve Ball (39) Divisional general counsel. LLB (Hons)/Solicitor (England & Wales). 3
John van Wyk (42) Business development director. 8

Note: The first figure after each name (in brackets) is their age at date of publication of this report. The second figure is the number of years’ service they have with Barloworld.

Operational review

Handling

Overview

All economies in which Barloworld Handling operates recorded growth in the past year, some less than anticipated. The division’s overall sales grew by 20%, although margins were reduced mainly due to a mix weighted by new equipment sales after two years in which new fleet acquisitions were put on hold. Short-term rental and used equipment activity grew strongly in all territories.

The Handling business returned to profitability, posting an operating profit of £6.3 million compared to a loss of £0.1 million in 2010. Continued focus on cash flow reduced working capital days of sales from 50 to 41, and there was a small cash inflow for the year.

Market share was mixed across our territories, with solid gains in Belgium, the Netherlands and the agriculture business. The evolution of our business to provide integrated solutions to our customers produced some significant contract awards. We have implemented a number of growth opportunities including expanding agriculture operations into Siberia and Mozambique.

Good progress was made on people management and we are building a strong team to implement our strategy. Empowerment and transformation received attention and our South African operation achieved dti B-BBEE Level 2. Sustainability initiatives included improving energy and emission efficiencies in line with group targets and rolling out our ISO 14001 certification programme in the UK and The Netherlands.

Stakeholder value creation

Vision: To create value through market leadership and empowered people by delivering integrated customer solutions through service excellence and innovation.

Solutions are built largely on supplying new and used Hyster lift trucks and complementary materials handling equipment, AGCO and CLAAS agricultural equipment and SEM earthmoving machinery. The division provides sales, hire, long-term rental, parts, maintenance contracts and operator training for Hyster equipment in seven territories (the UK, south-eastern US, Belgium, the Netherlands, South Africa, Angola and Mozambique); and sells AGCO, CLAAS and SEM new machines and parts in South Africa, Mozambique and Siberia.

United Kingdom

In 2011 the UK lift-truck market rose from 19 906 units to 25 365. Market share fell slightly and our order book decreased from £14 million to £13.7 million.

The business reported its first operating profit since 2008, with a £2.3 million improvement on the prior year. New equipment revenue grew 42%, while service and parts recorded modest increases. The short-term hire fleet grew 9%, with a steady increase in utilisation from 65% in 2010 to 73% in 2011.

We also achieved strong wholesale margins through improved used truck sales channels. Receivable days of sales and debtor age profile continued to improve, with stock levels below target, generating £4 million cash.

Cost-reduction measures included rationalising our supplier base and logistics operation while meeting requirements through increased efficiencies.

Our contracts with the UK Ministry of Defence (MoD) were extended to January 2013 and our unique solution for managing the MoD’s fleet of forklift trucks and ancillary equipment has been enhanced.

Controls on contract management and risk were strengthened and we are targeting growth in Truckserve agreements using existing resources.

Barloworld Handling UK won a national award for its engineer apprentice scheme in 2011. All field service managers and dispatchers have received training and strategic selling skills training was completed for sales staff.

ISO 14001 environmental accreditation was achieved in Cumbernauld and Warrington and three more locations are earmarked for 2012. In line with our objective of improving energy and emission efficiencies, our diesel consumption was 4% down on 2010 and electricity use declined 9%, despite increased activity. Overall carbon tons produced were down 7%.

Safety issues continue to receive attention and our LTIFR fell from 2.3 in 2010 to 2.2.

The UK lift-truck market is predicted to grow by 3% in 2012. We are targeting a significant market share improvement, driven by effective selling and developing integrated solutions. We will also seek growth in our maintained truck population by investing in customer service representatives and capitalise on increased demand for short-term rental.

United States of America

Lift-truck orders in the south-eastern US rose from 25 262 units in 2010 to 38 001 in 2011. Our delivered share grew slightly. The 19% increase in sales reduced operating losses from US$2.3 million in the 2010 financial year to US$0.3 million in 2011, with operating profits recorded in five of the last six months of this review period.

We recorded robust growth in equipment sales in 2011 as customers start to reinvest in materials-handling equipment. New inventory levels fell by a fifth over the prior year-end, despite significantly higher sales. Service performance improved, although parts growth was modest.

The short-term rental business recovered strongly and sales are approaching pre-recession levels, with activity up 25% on 2010. Utilisation ended the year at 78% on a 20% larger fleet than in 2010.

Used equipment sales and margins also improved. Pricing continues to recover, with shortages emerging in some categories. The secondary market for electric trucks remains challenging.

We launched our business integration solutions (BIS) team in April 2011 to offer customers outsourced materials handling and warehousing solutions, and secured our first new account in June. Our directed sales management initiative continues to gain acceptance.

To expand our skilled technician base, we have reintroduced our apprenticeship programme with an intake of 25 learners. Technicians and sales and service managers completed skills development programmes during the year.

Sustainability issues continue to receive attention. Petrol and diesel consumption rose by 6% over 2010, with electricity consumption falling by a similar level. This is pleasing against the 19% growth in sales. Actions to decrease our carbon footprint included upgrading oil/water separator equipment in our Augusta, Columbia and Tampa stores, and installing energy-efficient lighting in the Columbia and Tampa stores and Atlanta Logistics Support Centre. Total GHG emissions were flat.

Unfortunately our LTIFR increased from 0.4 to 0.8 and we have instituted defensive driver training for employees driving on behalf of the company.

The US order book dropped, from US$27.2 million in 2010 to US$24.7 million due to lower sales to the government. The slow economic recovery is expected to continue in the US, stimulating further growth in the materials handling equipment market. Short-term rental will continue to improve, albeit slowly, and we will enhance profitability by replacing older assets, reducing maintenance expenses and increasing market-related rental rates.

South Africa

Handling

The lift-truck market more than doubled to 8 692 units in 2011, while the big-truck market is recovering well. Market share was maintained.

Revenue rose 21% on higher sales and short-term rentals. An expanded fleet (to service new customers in the Western Cape) and higher new inventories contributed to a 26% rise in net assets. Operating profit growth was moderate, reflecting one-off costs largely for installing new information systems and lower currency gains. Margins are falling on increased competition and wage pressures.

We launched a performance management programme and technical product training for sales staff, with a new commission structure. A national accounts team has been formed and direct mail campaigns initiated.

Confidence levels are favourable and the big-truck market, especially in the container business, is improving. Our national account strategy should support growing market share and the new low-cost truck will enable us to compete in a significant new market sector.

The business process re-engineering project will help streamline processes and efficiencies and improve customer service.

Agriculture

In a pleasing turnaround, Agriculture marked its 10th anniversary with a revenue increase of 30% over 2010, reflecting the market recovery and increased market share.

Revenue from the new Bethlehem, Bothaville and Middelburg retail branches contributed to revenue in the last three months of the year.

Operating profit rose sixfold on improved volumes, supported by the sale of old stock and currency gains.

Net assets rose 4% over 2010, facilitated by the investment in working capital and fixed assets for new branches, purchase of land for the Middelburg branch, and the new implement business. This was partly offset by a strong improvement in debtor collections.

In South Africa, the price of maize rose above R2 000/ton, boosting sales of larger tractors and combines. The tractor market grew 18% from 2010, the baler market 16% and the combine market 25%.

We delivered our 100th MT800 Challenger tractor in 2011 and have established this as a leading brand in the high-technology segment, augmented by the introduction of Challenger rotary combines, large articulated tractors and self-propelled sprayers.

The new Massey Ferguson 8600 range of tractors was launched successfully. We also received the first basic specification, low-cost MF200 tractors from AGCO late in the period, enabling us to participate in a new market segment. We were market leaders in round balers in 2011.

We continued our dealer development programme. Poor-performing dealers were cancelled and new dealers appointed to improve coverage. A dealer satisfaction index to measure our support and service levels was launched on top of the existing customer satisfaction index. Initial surveys returned strong scores and action plans were implemented to address areas of concern.

A new forecasting tool for machine sales is achieving greater accuracy on stock orders.

Parts stockholding was increased and delivery time on emergency parts reduced. The stock forecasting and management system was overhauled to improve parts availability and response times.

Prospects are positive for the business given higher global agricultural commodity prices.

Our increased participation in both the low-cost and high-technology segments is expected to support market share growth. The first range of equipment imported by the implement division will start contributing to the bottom line in 2012.

SEM

The SEM business recorded a 31% increase in revenue. Operating profit nearly trebled due to higher sales, improved margins and savings using Barloworld Handling’s existing infrastructure.

Net assets increased off an unrealistic base in 2010 founded on low stock and high creditors.

We have now sold over 150 units in the South African market, and penetrated markets in Mozambique and Namibia.

The new 6-ton 660 series wheel loader was introduced to complement smaller models, and meet demand for larger machines. The SEM factory has made significant investments to improve capacity and product quality.

A dedicated SEM sales manager was appointed and product training completed for all after-sales support staff, maintenance technicians and engineers.

The strong product reputation being built in South Africa will support market share growth. Entering new southern African territories will ensure volumes on this high-return business model and the established machine base will increase parts consumption.

Sustainable development

Environment

Combined fuel consumption by Handling SA, Agriculture SA and SEM on the Boksburg site rose by 6%, driven by growth in the business. Electricity consumption dropped 25% but water consumption rose significantly from a low base. New water and electricity meters have been installed for each business unit to improve accountability and provide an accurate measurement base, with the focus on achieving group targets by 2015.

All the Boksburg-based businesses participate in an initiative to recycle waste paper.

Actions to reduce fuel consumption in Agriculture include instituting a pre-approved list of fuel-efficient vehicles for company cars and monitoring fuel consumption monthly.

Safety

In line with our focus on safety, our LTIFR reduced significantly from 5.4 in 2010 to 1.1 in 2011.

Transformation

The Handling group moved from a level 4 contributor on the dti’s B-BBEE scorecard in 2008 to level 2 in 2011.

Mozambique

Agriculture

Barloworld Agricultura sold 114 units, incurring a first-year loss of US$0.2 million.

In addition to achieving our unit target for tractor sales, we sold 19 Hyster units on full rental maintenance contract over four years. We also signed maintenance and service contracts with large sugar estates.

Our new business distribution model will allow better market coverage, supported by developing our sub-dealer network. SEM products will also be introduced to Mozambique in 2012.

Russia

Agriculture

Agro Machinery started trading in Russia in October 2010. We operate in three regions, Omsk, Novosibirsk (head office) and Altay, an area with 9.86 Mha of arable land.

The business achieved revenue of US$5.8 million with a small operating loss, an excellent result for a start-up business in a recovering market. We became the third-largest Challenger dealer in our first year and have been appointed as the SEM dealer in Russia, which will support our profitability in 2012.

Agro Machinery was accredited by Rosselkhoz Bank as an authorised supplier of mechanisation equipment and training completed for sales and technical staff.

Agro Machinery will benefit from a fully operational team in the new financial period and we will also expand our territory.

Three implement suppliers have been identified and agreements will be finalised during 2012.

Europe

Belgium

The forklift market in Belgium rose from 6 733 units in 2010 to 8 187 in 2011, and we increased our market share from 7% to 8%.

We returned to profitability, with revenue up 35% and growth in all segments, except used equipment where there was a shortage of stock. New equipment revenue grew 35% on the back of major customer orders. Investment in new trucks contributed to 28% growth in short-term rental. Parts sales, particularly tyre sales, grew strongly.

The roll-out of a focused service module saw 60 engineers trained in using computers to improve customer service and efficiency.

LTIFR reduced from 4.7 to 4.4, reflecting new procedures in our workshops and investment in safety equipment and awareness campaigns.

Following an investment in an eco-friendly system, heating costs decreased by 12%. Fuel emissions dropped 9% on improved truck transport planning. Customer communication has been enhanced via a new interactive website and quarterly newsletters with environmental sustainability updates.

The lift-truck market is expected to show almost no growth in 2012 as companies consolidate after new equipment investments in 2011. Short-term rental should continue to grow.

The Netherlands

The market for new lift-trucks rose from 8 598 units in 2010 to 12 098 in 2011 and our market share rose slightly. Overall revenue was up 35%, with new equipment sales 73% higher than the prior year. Used-equipment sales were up 23% and parts revenue by 17%.

New equipment, service and parts margins decreased slightly due to market pressure but used equipment margins improved. The rebuilt truck programme resulted in the sale of 30 units in 2011.

The business achieved ISO 9001 and ISO 14001 certification in 2011. The former will allow us to participate in government and major account tenders, while ISO 14001 will generate extra credits in the evaluation process for tenders.

We continued to drive our energy and emission efficiency improvement programme. Petrol and diesel consumption rose 23% on increased activity, partly offset by a 17% drop in electricity consumption. While business activity grew by more than a third, GHG emissions rose by only 7%. In line with a national campaign, we are actively promoting MVO (Maatschappelijk Verantwoord Ondernemen) in terms of which larger companies will soon require their suppliers to provide proof of a sustainable business proposal.

The overall Handling order book at year-end was up 30% on the previous year. Growth is expected in most economies. Barloworld Handling expects modest growth in profitability.

Our year-end order book in units is up 57%. Moderate market growth is anticipated for 2012 and the business aims to achieve sustainable market share growth over the next few years.

Focus will continue to be placed on sales of big trucks such as empty container handlers and reach stackers, e-sales, strategic alliances in certain geographic areas and integrated customer solutions.

Outlook

The overall Handling order book at year-end was up 30% on the previous year. Growth is expected in most economies, but at a slower rate due to continued global economic uncertainty. Barloworld Handling expects modest growth in profitability.

Lift-truck market growth will probably be in low single digits in the coming year as much pent-up demand was reflected in market growth in 2011. Short-term rental is expected to continue its strong growth. Service and parts should grow with an ageing customer truck population.

The outlook is positive for the agricultural business, buoyed by agricultural commodity price increases and rising sales in the low-cost tractor segment. An expanding footprint and early acceptance in new geographies will significantly support growth in coming years. The SEM business will benefit from a larger machine range, a growing after-sales support and an extended footprint.

Barloworld Handling’s integrated approach to providing sustainable solutions
Our products

The complete Hyster range is now one of the most energy efficient on the market with several new products launched in the last year alone featuring energy-efficient intelligent design.

Our principal and manufacturing facilities

All American and European manufacturing facilities where Hyster products are made have achieved ISO14001 registration. Each location closely tracks environmental and safety performance and sets objectives each year to drive continual improvement.

Our customer support centres

We introduced several new initiatives to improve the environmental performance at our workshops, parts operations, short-term hire depots, offices and driver training facilities. These include energy efficiency measures and working with waste contractors to introduce DMR (Dry Mixed Recycling) and reduce the amount of waste sent to landfill.

We have three ISO 14001 sites in the UK and the Netherlands and are busy rolling out the programme to other sites.

Our service support fleet

We are upgrading our service support and utilising appropriate technology to enhance the efficiency and reduce the environmental footprint of our service. Our UK fleet is fitted with vehicle tracking using global positioning (GPS) technology, which is used to manage the 450 service vehicles throughout the UK. Service despatchers can see the exact location of service vehicles and assign the best engineer according to location, availability, parts stocked on the van and skills required. Routes and schedules are optimised, helping to reduce mileage and response time. Changes made to our UK fleet of service vehicles has reduced its fuel consumption by 18%.

Our waste

Our engineers ensure strict adherence to ‘duty of care’ processes for proper waste management on customer sites including the appropriate disposal of used tyres, batteries and other hazardous materials from forklift trucks.

Our driver training programme

Similar to driving a car, forklift truck energy consumption is also related to the way that drivers operate the truck. As part of the Barloworld driver training programme that trains more than 12 000 forklift drivers each year, trainees are encouraged to be more energy conscious in the way they operate the truck. Changes to site speed limits and rules can also make a difference.

Our people

Through our Good People Management programme we ensure that our 1 200 engineers and technicians are well trained and up to the task. We currently have 124 apprentices and learnerships to ensure we have the skills and talent to fulfil customers’ requirements into the future.

Intelligent designs of the future

Our principal, Hyster, has consistently engineered its forklift trucks to be compatible with the latest in alternative power technologies and supports the adoption of greener technologies through engineering collaboration, analysis and extensive internal and field validation testing.

Hyster will benefit from a recently opened concept centre in Hampshire, where a highly experienced team of design engineers will develop 3D models, build prototype forklifts and components, test and validate equipment prior to introduction into the manufacturing process. The centre is investigating advanced technologies to further reduce energy consumption and carbon impact, increase productivity and reduce toxic material content.

We are committed to help customers reduce the environmental impact of their materials-handling and logistics operations.