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2 500 jobs on the line as Barloworld exits logistics, auto businesses

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Barloworld Logistics could soon be history after the decision by CEO Dominic Sewela to exit the logistics sector.

Sewela said this after announcing the company financial results for the six months ended March 31.

He said that the business had been given a three-year period to turn around, with a decision on its future scheduled for September this year.

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However, given the current circumstances, Sewela had decided to exit the logistics business.

The automotive business had also been put under review, he added.

“We shall look at the business and look at alternatives to say what do we do with it.”

Barloworld’s automotive business was particularly hard hit by the national lockdown to curb the spread of Covid-19. The initial hard lockdown had halted vehicle sales and travel for a period, and by implication vehicle rentals. The current lockdown at Alert Level 3 still restricted holiday tourism and travel.

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Automotive and Logistics chief executive Kamogelo Mmutlana noted that his division was shedding 2 500 jobs as Barloworld worked to rightsize the business for the current market.

Avis would lose 50% to 60% of its staff, logistics 30%, the division’s headquarters 47%, and the motor retail business 30%, with a number of dealerships to close.

Mmutlana also noted that the Barloworld vehicle rental business would defleet from 27 000 vehicles in March, to 10 000 vehicles by February 2021.

Logistics contributed 8% to revenue for the six months ended March 31, with automotive trading at 29% and the vehicle rental business at 13%. The remainder of revenue was sourced from Barloworld’s equipment business in Russia and Southern Africa.

Combined, the vehicle rental, automotive trading and logistics businesses contributed 20% to operating profit for the period under review.

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Total Barloworld revenue declined by 12%, to R25.2-billion, with operating profit down 27%, to R1.2-billion.

“The returns have all been lower than expected,” said Sewela. “Not all of it was Covid-19 related. We were already in a weak environment before that.”

He added that it would probably take between 18 and 24 months before “things normalise”, especially as the current spate of retrenchments in the wider economy would limit available consumer spend.

He said that even though a lot had been spoken about infrastructure development to boost the South Africa economy, nothing had come of it yet.

“We are not going to hold our breath for that. It is very important that we focus on fixing the business. We remain very conservative with our balance sheet.”

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