Equipment Equipment
Russia

Medium-term strategy: Grow

MAINTAIN PERFORMANCE ABOVE TARGET FOR GROUP RETURN ON INVESTED CAPITAL
Actions in managing for value   Highlights  
  • Grow prime product market share and aftermarket
  • Maintain effective cost controls and culture of operational efficiency
  • Further engender customer-centricity
  • Continue focus on technology-enabled solutions
  • Upscale skills and capability in line with growth opportunities
 

Cash flow
$22.2 million cash generated

(2017: $17.5)
 

Return on invested capital at
21.6%

(2017: 18.4%)
 

Economic profit at
$20.0 million

(2017: $12.6 million)
 

Operating profit at
$61.7 million

(2017: $43.7 million)
 

Operating margin at
10.3%

(2017: 11.3%)
WE REGRETTABLY HAD ONE WORK-RELATED FATALITY
Concerted efforts have been made to continue strengthening and
propagating a safety culture throughout the organisation

Despite harsh trading conditions and complex geopolitics, the Equipment Russia business delivered record results in 2018 with a 57% and 41% increase in Dollar terms in revenue and operating profit respectively, while operating margin moderated due to the change in sales mix. This was driven by a strong mining performance with machine deliveries into various commodity sectors, particularly in the gold and coal mining sectors.

Our aftermarket business performed above expectations driven by component and machine overhauls, site presence agreements and new machine assemblies.

In spite of the risks associated with geopolitical uncertainties, further sanctions and the introduction of higher retaliatory customs duties on US-sourced products, we have identified opportunities for further growth of our machine and aftermarket business, by focusing on developing solutions that are customer specific and incorporating technologies that support and enhance customer profitability. Our strategy of developing our branch network across the territory will support our value proposition and lead to opportunities. The infrastructure segment also presents opportunities should federal funding in Russia be directed towards projects in our territory.

Effective cost controls and a culture of operational efficiency, along with balance sheet management, supports our results. This involves continuous improvement in forecasting and stock realisation.

Managing for value driving operational performance

 

Revenue (Rm)

   

Operating profit (Rm)

   

Operating margin (%)

  Revenue (Rm)     Operating prot (Rm)     Operating margin (%)

Looking forward

Solid firm order book despite significant deliveries executed in second half of the 2018 financial year.

 

Order book ($m)

 
  Order book ($m)  

Looking forward

Industry   Business transformation focus   Trends

Industry

Geopolitical environment remains
volatile and challenging

Mining sector and commodity
outlook is expected to maintain
positive trajectory, increased
retaliatory customs duties will reduce
large mining product opportunities

 

Operational

Anticipating higher demand for
component and machine rebuild
solutions as many customers are
likely to extend the life of their fleets

We will work closely with Caterpillar
in carefully evaluating market
development and aligning price
levels where possible to mitigate the
impact of sanctions and increased
customs tariffs

Aftermarket revenues expected
to improve further on the basis of
increased population and anticipated
machine and component rebuilds

Drive growth consolidation, tight
control over expenses and working
capital management

 

Trends

Medium-term focus on owner
miners and mining contractors, who
typically procure larger construction
Caterpillar equipment manufactured
in Russia, Europe, Latin America or
China

Increase in the utilising of formal
tenders and online purchasing
practices to obtain optimal pricing
across competitors by customers

TECHNOLOGY-ENABLED SOLUTIONS
Notable success in the use of immersive technologies, simulators and remote control technologies in 2018
This will continue to be central to our customer value proposition

Divisional key performance indicators

  Equipment Southern Africa Europe Russia Handling Share of
associate income
Financial capital 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
Revenue (Rm) 27 572 23 428 19 775 18 287 7 797 5 141 114 765
Operating profit/(loss) (Rm) 2 594 2 367 1 790 1 785 804 582 (20) (5) 241 97
Net operating assets (Rm) 14 596 15 091 11 637 10 106   2 441 2 959 2 544 306 443 14 902 15 534
Social capital                    
Employee headcount 5 763 5 766 4 719 4 824 18 17 1 026 925 25 24
LTIFR 0.31 0.32 0.32 0.31 0.00 0.00 0.20 0.45 0.00 0.97
Work-related fatalities 1 0 0 0 0 0 1 0 0 0
B-BBEE rating n/a n/a 1 1 n/a n/a n/a n/a n/a n/a
Natural capital                    
Petrol and diesel (ML) 5.09 6.30 4.14 5.43 0.00 0.00 0.95 0.87 0.02 0.36
Grid electricity (MWh) 18 544 19 615 15 003 16 137 66 115 3 475 3 363 27 213
Non-renewable energy (GJ) 253 236 301 809 206 428 258 237 591 693 46 217 42 879 605 14 169
GHG emissions (tCO2e) (scope 1 and 2) 28 678 33 033 25 074 29 656 49 67 3 555 3 310 51 1 131
Water withdrawals^ (ML) 170 170 158 158 1 1 11 11 1 2

Lost-time injuries multiplied by 200 000 divided by total hours worked.

# Not rated in 2017.

^ Municipal sources.

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