Equipment and Handling

Equipment has been a Caterpillar dealer for 89 years. Equipment sells and supports the broadest open cast and underground mining equipment product line in its territories as well as construction equipment and power systems.

Handling is a dealer for Hyster and Utilev, providing customised materials handling and warehousing solutions in manufacturing and distribution industries, while the agriculture business represents Massey Ferguson and Challenger brands, offering solutions to all farmers from cost-effective tractors to leading technology equipment.

Leadership team

  • Peter Bulterman

    Peter Bulterman
    Chief executive officer

    Equipment southern Africa, Iberia and Russia

  • Dominic Sewela

    Dominic Sewela
    Chief executive officer

    Equipment southern Africa

    Appointed CEO designate Barloworld Limited on 1 October 2016

  • John Blackbeard

    John Blackbeard
    Chief executive officer

    Power Systems southern Africa, Iberia, Russia and Handling

  • Viktor Salzmann

    Viktor Salzmann
    Chief executive officer

    Equipment Iberia

    Retired from executive responsibilities on 30 September 2016

  • Quinton McGeer

    Quinton McGeer
    Chief executive officer

    Equipment Russia

    Appointed CEO Equipment Iberia on 1 October 2016

  • Gavin Knight
    Chief executive officer

    Equipment Russia

    Appointed General director Equipment Russia on 1 October 2016


 

Financial highlights

Revenue down 0.5%   Operating profit down 4.4%   Operating margin resilient at
R29.4 billion
  R2 264 million
  7.7%
(2015: R29.5 billion)
  (2015: R2 368 million)   (2015: 8.0%)

Brands represented

Equipment  
Equipment  
Handling  
Handling  

Financial and non-financial performance indicators

 
      Revenue   Operating
profit/(loss)
    Net operating
assets
 
Economic
Year ended 30 September
    2016
Rm
  2015
Rm
  2016
Rm
  2015
Rm
    2016
Rm
  2015
Rm
 
Equipment     27 857   27 479   2 239   2 362     15 642   18 681  
– Southern Africa     18 547   20 307   1 585   1 894     10 546   12 761  
– Europe     4 473   3 793   55   71     2 694   2 913  
– Russia     4 837   3 379   599   397     2 402   3 007  
Handling     1 505   2 027   25   6     910   1 125  
      29 362   29 506   2 264   2 368     16 552   19 806  
Share of associate (loss)/income             (22)   294            


 
      Petrol and
diesel (ML)
  Electricity
(MWh)
    Non-renewable
energy
(GJ)
  GHG emissions
(tCO2e)
(scope 1 and 2)
      Water
(ML)^
 
Environmental
Year ended 30 September
    2016   2015   2016   2015     2016   2015   2016   2015       2016   2015  
Equipment     9.30   9.10   28 254   29 801     444 626   441 667   44 724   45 606       260   240  
– Southern Africa     6.87   6.61   18 222   19 991     319 537   316 019   35 030   35 891       216   192  
– Europe     1.57   1.60   6 356   6 469     81 369   82 258   6 295   6 376       34   37  
– Russia     0.86   0.89   3 676   3 341     43 720   43 390   3 399   3 339       10   11  
Handling     0.92   1.33   621   884     36 357   50 977   2 979   4 083       5   7  
      10.22   10.43   28 875   30 685     480 983   492 644   47 703   49 689       265   247  


 
      Employee
headcount
  LTIFR     Work-related
fatalities
  B-BBEE rating*    
Social
Year ended 30 September
    2016   2015   2016   2015     2016   2015   2016   2015    
Equipment     7 031   7 336   0.61   0.79     0   0            
– Southern Africa     4 941   5 287   0.35   0.40     0   0   3   2    
– Europe     1 255   1 245   2.45   3.31     0   0            
– Russia     835   804   0.12   0.48     0   0            
Handling     444   595   1.52   2.36     1   0   3   2    
      7 475   7 931   0.65   0.89     1   0            

^ Municipal sources.
* B-BBEE rating for South Africa only. 2016 based on revised dti Codes of Good Practice.

 

Social   Environmental

Equipment

Southern Africa

Operating context


Economic

Low commodity prices impacted the coal, copper, iron ore and platinum sectors although some early signs of recovery were evident towards the end of 2016.

The Rand depreciated against the US Dollar during the financial year.

Low Gross Domestic Product (GDP) growth forecast at 0.5% in South Africa and continued weakness in the mining and quarrying industry.

The Angolan economy was negatively impacted by the lower oil price and shortages of US Dollars.

Industry

Mining houses have continued to curtail capital expenditure as a result of the downturn in commodity prices.

The temporary cessation of mining activity by one of our largest customers in the DRC has persisted with a projected completion of their new copper processing plant in the second half of 2017.

Impact

Decline in primary equipment sales due to the decrease in mining activity.

Aftermarket continues to be resilient, constituting a higher portion of our revenue mix relative to new machine sales.

Equipment vision
To be the leading Caterpillar dealer creating shared value through expertise and partnership

 

Business overview

Barloworld Equipment operates in 11 countries in southern Africa with an overall headcount reducing from 5 287 to 4 941 employees at year-end. We operate in close alignment with Caterpillar across the territories with key initiatives in place to capture growth in parts and product support through the Dealer Growth and Profitability Project (DGAP).

As a result of the continuing downturn in the mining sector, customers have continued with curtailment of capital expenditure and a deferment of certain projects. Despite customers delaying maintenance and normal component replacement, our Seed Grow Harvest business model has proven resilient with aftermarket representing 56% of our total revenue mix offsetting part of the decline in new machine sales.

With the continued low oil price and the resulting Dollar currency shortage in Angola, we have curtailed local currency transactions in that country to mitigate the risk inherent in holding substantial local Kwanza cash balances in the event of further devaluation of the currency. Angola has also seen significant cutbacks of infrastructure projects due to the decline in government revenues following the decrease in the oil price.

The temporary cessation of mining activity by one of our largest customers in the DRC has had a notable impact on the associate income line. It is expected that activity will resume in the second half of 2017 once the new copper processing plant has been commissioned. The long-term outlook is, however, positive as the DRC has rich copper deposits and we have seen a recent uptick in the price of copper.

Decisive measures are being taken to minimise the impact of the downturn. Focus continues to be on reducing working capital, tight management of costs and cash generation. Furthermore, safety and sustainability initiatives have been identified to improve employee and contractor safety and to also minimise the environmental impact in areas where we operate. Water recycling facilities have been installed in some of our key sites. Solar panels have also been installed at our biggest campus in Isando as part of the company’s stated intent of reducing the impact of our economic activities on the environment. Significant cost savings are expected to be realised from these initiatives.

Barloworld Equipment operates   The business transformation

The opportunity exists to use expanded warehousing facilities in South Africa for parts distribution to the rest of the continent.

We are gearing up to deliver exceptional customer service through technology-enabled solutions that use predictive tools to proactively target aftermarket opportunities.

2016 performance review

Despite the decline in the mining industry, the fluctuating currencies and negative sentiment, we delivered a resilient performance in the year ended September 2016. Revenue decreased from R20.3 billion in 2015 to R18.5 billion. Operating profit decreased by 16.3% from R1.894 billion in 2015 to R1.585 billion, driven mainly by lower machine sales and margin pressure. Focus on effectively managing working capital saw a positive cash generation in this year of R2 976 million compared to cash utilisation of R1 723 million in 2015.

In the current economic environment, growth will be driven by the aftermarket business as customers extend the useful lives of their equipment and reduce capital expenditure on new machines.

The business transformation process currently under way is aimed at optimising and reorganising the business to ensure the company continues to deliver acceptable financial returns through the cycle, and to ensure the business is geared to take advantage of the upturn in the mining and construction sectors when it happens. In addition, existing plans to drive internal efficiencies are being accelerated.

The focus on operational efficiencies, tight management of working capital and cash generation will continue.

Mining

The core mining unit deliveries have seen a decline year on year on the back of the industry downturn. The business has, however, achieved record used equipment sales, breaking the 500 unit mark for the first time. Margin pressure was experienced due to the delay in effecting price increases related to currency depreciation.

Expectations are that 2016 is likely to be the bottom of the cycle with some improvement in activity expected in 2017. A number of machines are coming up to their natural replacement cycle. The focus on proactively growing the product support business through active customer engagement continues.

Construction, Rental and Used

Revenue from the construction business declined 6.5% from R3.9 billion in 2015 to R3.7 billion in 2016. The industry remains under pressure with a number of projects delayed in the southern Africa region. The need for infrastructure development will support construction demand in the future.

Within the context of various economic pressures, our Rental and Used business has served as an attractive alternative for customers to access equipment with reduced capital outlay. Revenue from the used business was up from R1.3 billion in 2015 to R2.1 billion in 2016, an increase of 59% over the same period. Rental revenue in the South African business declined from R1.0 billion in 2015 to R819 million in 2016 as stringent credit criteria were applied to mitigate against the risk of default.

Power

Revenue in the Power business decreased from R1.2 billion in 2015 to R1.0 billion in 2016, largely driven by the decline in oil prices.

As an important growth segment in our Vision 2020, we have continued strengthening and pursuing opportunities in our Power business.

In South Africa we launched lower-cost diesel Caterpillar generator sets, embedded our engineering and project management capability, and consolidated our product support offering. Our local facility to assemble Cat electric power generators to meet rising demand, reduce unit cost and promote localisation is working well.

The Angolan power business was restructured to take advantage of the skills synergies with the Portuguese power business.

The outlook for the region is that the challenging environment will continue in 2017. We are however pursuing gas and solar photovoltaic (PV) opportunities as the renewable energy sector continues to show indications of future growth.

The future to 2020: trends and operating context

The industries in which our customers operate, and by implication our own business, are highly cyclical. Indicators are that 2016 will see the cycle bottoming out with some slight improvements in activity expected in the second half of 2017 with more recovery expected in 2018 as ageing machine fleets come up for replacement. With the average age of existing machines in South Africa at between seven to eight years, we anticipate an improvement in component change-out cycles, which will benefit our aftermarket.

Together with Caterpillar, our digital strategy to deliver technology-enabled solutions will continue to be a focus area for us to further enhance our customer service and delivery of innovative customer solutions.

We will continue to identify profitable growth opportunities to create value throughout the peaks and troughs in our aftermarket, Rental and Used, Construction and Power businesses.

2017 outlook

There are a number of greenfield projects that we are pursuing that offer opportunities in the coming year, including construction sales, large mining truck and underground markets.

With a number of cost containment and business transformation initiatives implemented, we are in a position to take advantage of the upturn with a leaner, more agile, operationally efficient organisation.

We also expect the need for infrastructure development to underpin increased construction equipment demand.

The 2017 revenue outlook range for Equipment southern Africa is between R18 billion and R19 billion (2016: R18.5 billion).

Mining

World-class support

Three Cat 7495 Electric Rope Shovels sold to Jwaneng diamond mine in Botswana between October 2011 and September 2012, the first to be delivered in Africa, have now reached their 25 000 hour milestone component replacement cycle.

When Barloworld took over the distribution and support of the shovels in July 2012, our team at Jwaneng was involved in commissioning the new machines. These were to be operated by the Majwe Mining joint venture, the mining services contractor for the mine’s expansion project.

All three shovels were delivered on time, built according to schedule and, most importantly, with an impressive safety record. Majwe Mining entered into a full Maintenance and Repair Contract (MARC) with Barloworld Equipment Botswana to maintain the fleet. These were the first Cat 7495 electric Rope Shovels to be included in our line-up and have performed very well. The machines are achieving exceptional high availabilities and mean times between failures.

The sheer size and complexity of the electric rope shovels highlight the remarkable achievement of Barloworld Equipment’s team at Jwaneng – as the first to assemble them and the first to complete the 25 000 hour intervention after several years of high availabilities. The Cat 7495 shovel has an operating weight of about 1 388 000 kg and a payload capacity of 109 tonnes, filling an ultra-sized off-highway truck in just three passes.

The decision by Debswana to put its faith in the Cat Rope Shovels for its expansion project was due to the global reputation of the product, as well as a competitive total cost of ownership deal backed up by Barloworld Equipment’s world-class regional support structure. The other two machines will be brought into the rebuild yard for their 25 000 hour planned component replacements before the end of the 2016 calendar year.

 

Russia

Operating context


Economic

GDP contracted further in 2016, some recovery is expected in 2017.

A sharp fall in global oil prices resulted in a prolonged recession with reduced export earnings and curtailed imports and investment.

Ruble depreciation raised inflation and reduced private consumption.

Industry

Mining showed a modest improvement driven by the gold and base metals segments while coal mining remained depressed.

Infrastructural investments remained focused on a few mega projects rather than a proportionate spend across regions.

Impact

Despite low economic growth, improvements in the mining segment had a positive impact on mining unit sales, with a higher than projected increase in orders and revenue.

Our Seed Grow Harvest business model is proving resilient, with aftermarket business constituting a high portion of our revenue mix relative to new machine sales.

Business overview

At the end of the 2016 financial year, Barloworld Equipment Russia had 835 employees operating out of more than 30 locations across a territory covering 9.9 million km2.

Our business model remains focused on seeding, growing and harvesting the machine and engine fleets in our dealership territory. Customers invested in extending the useful life of equipment bought in previous periods, which continued to support revenue from the aftermarket.

Although the business environment has transformed over recent years to be much more competitive and complex, we remain positive in our ability to overcome challenges by exploring available opportunities with our experienced employees and branch network.

During the year, we remained focused on leveraging our internal core competencies, and restructuring our processes and capabilities to align with the changing marketplace, where customer activity in gold and base metals has been positive.

Business overview

2016 performance review

Despite an overall slowdown of the Russian economy, currency volatility and sanctions, Barloworld Equipment Russia delivered a solid result for the year ended September 2016. Our revenue increased by 17.5% in US Dollars to US$329 million. Operating profit increased by 27.8% from US$32 million in 2015 to US$41 million in 2016, driven by strong aftermarket performance and some recovery in the mining segment. Tight cost controls and balance sheet management further enhanced our results. Although local currency devaluation had a negative impact on the competitiveness of equipment sold, it also reduced operating expenses (expressed in US Dollars), allowing us to largely maintain our workforce and planned initiatives. Overall, the Russian Equipment business unit delivered a solid cash flow performance and improved financial returns.

The mining sector improved in 2016 from the low seen the year before, with gold mining customers remaining the largest portion of our business portfolio. The highlight of 2016 included the delivery of a complete mining fleet to GV Gold’s greenfield Ugahan project and the sale of nine underground loaders to Norilsk Nickel along with firm orders for additional underground mining equipment to be delivered in 2017. Coal underground mining production remained stable in 2016 in line with previous years. EMPR (extended mining product range) will supply the first Caterpillar HWM300 in Russia in late 2016, to be operational by February 2017. We have also successfully tendered to increase the length of a longwall for SUEK’s Kirova mine from 300 metres to 400 metres, which will be a first for the Russian market.

Our Gas and Diesel Power rental business has stabilised in the new lower oil price environment and remains pivotal to our power business strategy. Rental rollouts have significantly increased our used sales results and this trend is expected to continue into 2017. The sale of new gensets remained depressed in 2016 due to a lack of funding liquidity in exploration and production and purchasing policy changes within the gas and oil industry.

The future to 2020: trends and operating context

Our mining business represents our biggest opportunity with a number of greenfield projects ready to commence once global commodity markets improve. Russian oil and gas pipeline projects will remain one of our key areas of focus as Russia continues to adjust its economic and political focus towards its Asian partners. It is therefore important that we plan for a business that will continue to create value for our stakeholders, grow market share in prime product and aftermarket business and improve operational efficiency and competitiveness of our customers.

We are well positioned to take advantage of future growth supported by our extensive regional facility infrastructure with key hubs in Irkutsk, Kemerovo, Krasnoyarsk, Magadan, Norilsk, Novokuznetsk and Novosibirsk.

2017 outlook

Growth forecasts are based on the sustained gold price and low production costs, with the Russian Far East gold sector anticipated to play a major role in our 2017 performance, supported by the new regional service facility in Magadan. The strengthening coal price is forecast to improve revenue through new demand for equipment. Growth in 2017 will also be boosted by greenfield projects which will increase machine sales. These include Norilsk’s Bystrinsky project; a new longwall at SUEK’s Kirova mine; and two longwall plow systems with Kolmar in Nerungry, which includes providing auxiliary equipment and a power generation system for mining areas not serviced by the main electricity grid.

We will continue developing both e-business channels and technology solutions to enhance our customers’ experience as well as our rebuild and remanufacture power rental and used business.

The 2017 revenue outlook range for Equipment Russia is between $300 million and $370 million compared to revenues of $329 million in 2016.

Magadan facility opening

Magadan facility opening

Barloworld Russia has been ranked among the top-performing Caterpillar dealers in terms of sales and service capabilities throughout the CIS and Asia-Pacific. This achievement provides customers with the confidence that they can rely on Barloworld to provide services and parts for their equipment.

 

On 9 June 2016, Barloworld opened the new Magadan facility in Russia which comprises a component rebuild centre, a new warehouse, and new offices for our 73 regional employees.

The Barloworld business in Russia was started from scratch in 1998 with no facilities, no people, no inventory and no customer base and has grown considerably in the past 18 years as we delivered world-class products and aftermarket services to our customers.

Significant capital expenditure projects have been implemented throughout the Russian territories. These include investments in facilities in Novosibirsk, Irkutsk and a number of other facilities.

The Barloworld territory is one with significant mining opportunities due to it being on the richest gold reserves in Russia and worldwide. There is tremendous long-term growth potential for Russia and the Russian Far East in particular.

We invested US$10 million, excluding tooling and equipment costs, in this new facility to support the enormous growth potential in the region and to meet the needs of our customers. The facility was designed to meet Caterpillar’s world-class five-star facility standards, with the capacity to expand into the future.

The investments made are an indication of Barloworld’s and Caterpillar’s commitment to the Russian Far East for the long-term, to our employees, stakeholders, and customers, with whom we look forward to working in partnership to ensure collective success.

Iberia

Operating context


Economic

Positive GDP growth with improving macroeconomic indicators pointing to more positive sentiment.

Oil and gas continued to suffer from a lack of new investment due to ongoing low oil prices.

Inconclusive general elections results in both Spain and Portugal caused investment uncertainty during the year.

Industry

Yellow metal industry units continued to rise, albeit at the lower end of the construction market driven by small local worksite activity.

Regional used activity remained steady, but international used equipment sales continued to decline which negatively affected used equipment revenues.

Power activity particularly in the Marine segment remains strong.

Impact

The business has continued to deliver a lower operating cost base; however, revenues and profit, while positive, have been impacted by the lower activity as a result of the political uncertainty and sales mix.

Aftermarket continues to be resilient, constituting a stable portion of our revenue mix relative to new machine sales.

Business overview

With over 1 200 employees, Barloworld Equipment Iberia operates Caterpillar dealerships in Andorra, Cape Verde, Portugal and Spain through a network of 34 locations.

Over the year under review the company has focused on strengthening our capacity and capability by maintaining a well trained and experienced technical base to effectively service its network of key markets. The period also saw a number of innovative products, services and alliances being developed, which have kept the group at the forefront of local markets.

2016 performance review

New power system sales constituted a high proportion of revenue, buoyed by an improved marine market specifically in the MaK product range as well as investor diesel projects.

The revenue mix was similar to the prior year with aftermarket representing 44% of the overall revenue.

Gross margins were affected by an increase in sales of lower margin products, which reduced the overall operating margin.

Despite spending €0.6 million on restructuring our Portuguese operations, savings on operating expenses continue to be driven leaving operating expenses €3.9 million below the prior year level.

At year-end, working capital remained in line with last year’s levels, with an increased investment in our rental fleet as opportunities arose due to customers delaying investment decisions.

The future to 2020: trends and operating context

Our longer-term expectation is that improved political stability in the region will see a recovery in local economies, which will in turn drive growth in the new machine markets and associated product support. Given the lower number of new machines sold over the past years, the availability of quality used equipment will remain challenging but this is expected to be partially offset by equipment available for rental.

The power systems business remains a key component of our revenue mix, and the marine segment income is expected to be driven by an expanded product portfolio and new service offerings created in the past year through joint ventures and product tie ups. The rail segment has suffered some setbacks based on contract cancellations, but changes in emission standards are expected to improve penetration into this segment. Electric power activity is expected to remain muted as the co-generation market remains subject to punitive local legislation in the face of a current electricity oversupply.

Our product support business continues to be key to our business model. Iberia’s capacity and capability is well recognised and enables market penetration upon which market shares have grown over the past years. This has created a solid base from which further growth can be leveraged. The proximity of our operations to customers and continued development of this network will ensure that customers see Barloworld Iberia as a local supplier delivering world-class service.

The division’s alignment with our principals will continue to be driven by Caterpillar’s “Across the Table” initiative aimed at improving dealer performance. Areas such as customer experience management, technology enabled solutions and the development of e-business platforms will further enhance our value add to customers, thereby strengthening our brand.

2017 outlook

The short to medium-term outlook for Iberia remains mixed as continuing political issues plague the region and recent developments, most notably Brexit, bring into question the sustainability of the European Union model. Many European countries continue to suffer stagnant economic growth, which is expected to weigh down local economic growth. However, core Iberian economies are showing positive growth from a low base which is expected to start benefiting the segments in which the group operates as maintenance of infrastructure and other planned projects are reignited.

We will continue to focus on maintaining our market leadership position in our traditional markets, as well as identifying opportunities to penetrate both the new machine and used equipment markets and create related product support opportunities. The reputation we have grown in our power systems business, in which we deliver innovative and complete customer solutions specifically in the marine segment, will continue to help us create related product support opportunities.

We will continue growing our technology-enabled product support solutions offering and optimise market coverage for our excellent service capabilities. The synergies between our traditional businesses and our internally generated brands and routes to market will allow us to maintain market coverage at low cost.

The 2017 revenue outlook range for Equipment Iberia is between €270 million and €300 million compared to revenues of €274 million in 2016.

Facilities  of  the  future

Facilities of the future

As part of the ongoing renewal programme of the Barloworld Iberia network, in October 2015 a new facility was inaugurated in Seville, Spain, 40 years almost to the day after the facility it replaced started trading. The company took the opportunity to replace this aged facility with the second of their “branches of the future”, a concept first launched with the inauguration of the Barcelona branch in 2014.

These branches incorporate the latest available technologies in design, safety, ergonomics and energy-saving equipment which will ensure that not only is employee safety and efficiency enhanced, but it is done in the most environmentally efficient manner possible. As a design standard the building materials maintain ambient temperature in the branch while incorporating a high degree of natural light reducing the necessity for lighting.

LED technologies reduce the usage of electricity in the branch, including workshop and administration buildings. The centralised air-conditioning systems are the most efficient on the market, while water heating is done utilising solar energy.

The workshop and adjacent facilities have been equipped to provide our employees with a safe ergonomically efficient workspace. Services such as compressed air, oil and lubricants and water are all centrally managed by a distribution system which allows for availability on demand at each workstation, reducing the movement of heavy parts and equipment around the workshop. Safety is further enhanced with non-slip flooring, quick access and control for tooling.

The wash bay makes use of recycled water thereby reducing the need to draw on the local water supplies, while the paint shop uses the latest filtering technologies to ensure that pollutants are not released into the environment.

Waste oil recovered from our customers’ machines is now reutilised 100% through the treatment and conversion into new lubricant bases or treatment and conversion into recycled fuels used in the industrial sector.

The branch has successfully undertaken their ISO 14001 Environmental Management System certification, while the commitment to the environment and efficiency also extends to the GPS monitored service vehicle fleet employed from the branch.

Ongoing staff training on safety and environment is conducted.



External certifications and accreditations coverage 2016

EN6,EN8,EN10,EN22,LA6

Handling

Operating context


Agriculture

In South Africa the severe drought and currency volatility have had a negative impact on trading.

The credit downgrade in Mozambique has created further trading challenges; however, a new range of tractors should improve competitiveness.

We entered into a joint venture with BayWa in Zambia.

Lift trucks

The 2016 local elections and political uncertainty has impacted business confidence and has led to a slowdown in the economy with the SA market declining by 30%. Customers are opting to run lift trucks longer rather than purchase new machines.

Impact

Business profitability has been impacted by the trading conditions and we have restructured the business to reduce headcount and costs to better match the environment.

Handling vision
To be a trusted adviser to the materials handling, agriculture and construction industries

 

Business overview

We offer a wide range of agricultural mechanisation products and integrated solutions in southern Africa including Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland. The principal AGCO brands we distribute include Challenger and Massey Ferguson. Our focus is on providing equipment and technologies suited to local conditions and applications, complemented by the highest levels of parts, product and technical support.

The principal’s brands of Hyster and Utilev in the lift truck business offer a product range that enables us to service a diverse customer base. Our service and support structures differentiate us from our competitors.

2016 performance review

Tragically we had one work-related fatality during the year as a result of a motor vehicle accident. Due to a severe drought our agriculture business was negatively impacted. A decline in South Africa’s forecast maize crop to 7.262 million tons in 2016 saw tractor sales reduce about 24% from 7 149 units in 2015 to a low forecast of 5 400. South African revenue declined from R966 million in 2015 to R792 million. Revenue in Mozambique and Zambia was also down.

In the lift truck business, revenue declined by 6% from R723 million in 2015 to R681 million in 2016 as a result of the weak domestic economy.

During the year, we sold the Zambian operation into a joint venture with BayWa.

2017 outlook

We have entered into an agreement to dispose of our Agriculture and Handling businesses in South Africa into a joint venture company in which we will retain a 50% stake and the balance will be owned by BayWa AG, a German-listed company and leader in global agriculture.

The new Massey Ferguson Global series tractor range will close significant gaps in our product portfolio, which is expected to accelerate market share growth in the high-volume medium-size market segment.

Improved weather condition predictions together with the digital farming revolution present significant opportunities for differentiation by offering customers the latest technology solutions through partnerships. The SA government’s objective to kick start rural economic development through Agri-Parks also presents growth opportunities.

Some recovery in the lift truck market is forecast in 2017. The Hyster XT range offers the opportunity to grow our share in the mid-tier segment of the market, which makes up 48% of the total market. We will also focus on growing our parts business through competitive pricing and accessing new business opportunities.

AmaHlubi Sunflower Project

AmaHlubi Sunflower Project

With support from Barloworld Agriculture, the AmaHlubi community in South Africa’s North West province brought their first commercial sunflowers to harvest in 2016 in a project that is bringing the community together and creating wealth for its members.

Over the years, a lack of career opportunities saw community members seeking work away from their families, mostly on mines. Although some members were involved in small-scale subsistence farming, most fields ended up being leased to commercial farmers.

Agricultural activities in Khayakhulu have been consolidated to produce sunflowers commercially on a sustainable basis; sunflower oil is an important edible seed oil, with increased local demand making South Africa a net importer of sunflower oil. Through the project, available resources such as land, machinery and skills have been placed in a trust to which the community’s farmers are affiliated.

Barloworld Agriculture has been closely involved in undertaking soil inspections, giving advice on cultivation, fertiliser application and pest control as well as mechanisation planning and supply, including providing operator training to optimise and maintain equipment. Two Massey Ferguson tractors, a planter and a cultivator were delivered to Khayakhulu, and have been central to the mechanisation of sunflower production.

The first AmaHlubi sunflower crop has been a resounding success, in sharp contrast to a neighbouring farm where poor soil cultivation practices resulted in reduced yield. Plans are in place to plant 2 000 hectares in 2016, and to increase the number of hectares planted annually with a view to setting up a processing plant, creating more jobs and value for the community ensuring sustainable food production.