Barloworld’s DRC unit a potential cash cow

Barloworld’s DRC unit a potential cash cow
Published: 16 May 2007

Barloworld’s newly established joint venture in the Democratic Republic of Congo (DRC) had a potential to generate about $100m (R700m) in revenue within the first five years of operation, chief executive Clive Thomson said yesterday.  
Earlier this month it said it had entered into a joint venture with Tractafric Equipment, the Caterpillar distributor in the DRC, to service earth moving equipment in the copper- and cobalt-rich Katanga province. Barloworld is  Caterpillar’s distributor in southern Africa. 
“If you had to choose a patch of  Caterpillar territory of a certain square metres anywhere in the globe, this is probably the one you would pick right now,” Thomson said.  
He added that this was one of several opportunities available as Barloworld repositioned from a diverse conglomerate to a focused distribution firm.  
It is unbundling its cement and lime producer, Pretoria Portland Cement, and its coatings business, and has been disposing of underperforming businesses. The repositioning is expected to be completed by the end of this year.  
Thomson said all the big mining companies were investing in the DRC. Barloworld had logistics infrastructure set up in the Zambian Copper Belt near the DRC border.  
“We forecast equipment demand in the next five years [to reach] $275 million. “We’re potentially a $100 million revenue business in five years without paying goodwill” or making acquisitions, Thomson said.  
He added that Barloworld’s business in Siberia was still in its infancy and held enormous potential.  
Its territory has the world’s second-largest coal reserves as well as vast oil, gold, nickel and diamond deposits.  
Barloworld’s equipment division was its second-largest revenue earner in the six months to March. It reported revenue of R7.59 billion and operating profit of R628 million, compared with revenue of R7.66 billion and operating profit of R352 million for the motor unit.  
Thomson was bullish about the group’s logistics business, which increased operating profit in southern Africa by 235 percent in the same period.  
Barloworld gained 0.09 percent to R197.50 on the JSE yesterday. The general industrials sector added 0.1 percent.