Listed on the JSE under "Cyclical", transport and automobile companies are desperate to be anything but. Many have invested heavily to get away from the cursed label.
Diversification, however, is no guarantee of success. Ask McCarthy. The Durban-based group started life as a motor business, branched out into every imaginable form of retail, and is now back on the automobiles board after the Prefcor-led evolution into clothing, building supplies and even jewellery turned into a dead end.
The retail charge was led by then-CEO Terry Rosenberg. The retreat has been managed by his successor, Brand Pretorius, who now reigns over a group that looks remarkably like the motor holdings division he was employed to head in 1995.
McCarthy's next face is likely to be a black empowerment one. Banks, which hold 85% of the group after bailing it out of trouble with R1,1bn in 2001, want some of their money back. Their instruction to Pretorius and his management team is to make McCarthy "saleable". Market cap may be only a shadow of what it once was, and the share price a derisory 24c - from a former peak of R18 - but results show the group is on the road to recovery. Once that is complete, the target is a black empowerment buyer.
The banks, of which FNB is the biggest shareholder, say they are talking to several groups. The front-runner, though, is undoubtedly Thebe Investment Corp, which sees McCarthy as a gateway into the profitable government vehicle leasing sector. Thebe's tourism arm already has a car rental joint venture with another listed Durban company, Combined Motor Holdings (see story on page 124).
Another familiar JSE presence is also preparing to present an empowerment face. Mass transport company Putco confirmed recently that negotiations for the founding Carleo family to relinquish its 53% control to a black consortium were at an advanced stage. Past efforts to land empowerment partners have folded for lack of cash by bidders. At the time of writing, however, Putco suggested the deal was almost done.
One of SA's best-known automotive names is no longer on the JSE. Toyota SA was delisted in 2002 ahead of Toyota Motor Corp (TMC) of Japan's purchase of 75% of the company. Despite more than 20 years of domestic market leadership, the company had recently been losing money. Reasons included lack of access to export markets. In exchange for control, Toyota Japan offered entry to those markets, and export programmes are already under way.
Sadly, Toyota SA chairman Bert Wessels, who signed the company over to the Japanese, didn't live to see the benefits. He died suddenly of a heart problem late last year. He was succeeded as chairman - though in a nonexecutive capacity - by his sister Elisabeth Bradley.
If Toyota SA, founded by her father Albert Wessels, is no longer listed, another family company - Wesco - is. But for how much longer?
In selling to TMC, Wesco cut its stake in Toyota SA from 64% to 25%. The result was a 45% drop in Wesco's annual turnover, from R8,4bn to R4,6bn. Toyota used to account for 70% of Wesco, the holding company for the family's automotive interests. Bradley has wondered aloud whether there is a long-term JSE future for Wesco with such a shrunken asset.
Metair, the listed automotive components company, is the other main holding. Last year, despite higher financing and tax charges, turnover rose 33% and exports 46%, for attributable profit of R88m. Thanks to losses suffered by Toyota SA, the overall picture for Wesco was an operating loss of R30m and a pretax loss of R65m. Better news for 2003: thanks to vehicle exports, Wesco is expecting a positive contribution from Toyota.
No such problems for Eddie Keizan's Tiger Wheels. There, the main problem is not whether to list, but where. Early this year, Keizan said Tiger was happy to remain listed in SA "as long as we can". With so much group turnover now coming from outside SA, and a group restructuring in the offing, "moving offshore is a possibility".
If the listing does not move abroad, some operations will. A new aluminium wheel factory is to open in the US later this year, and the next big expansion is likely to be in Asia, where Tiger's vehicle-manufacturing customers are expanding production. "We have taken a view that globalisation is a route to success," says Keizan.
Tyre company Bridgestone - or Bridgestone Firestone Maxiprest, to give it its full name - had a difficult 2002. Despite a 24% turnover rise, a combination of a firmer rand, political unrest in Zimbabwe, losses at associate company RGA and an increased tax rate halved headline earnings .
Avis may be best known to the public as a car rental business, but it's the fleet services arm that underpins the group's continued growth. Vehicles under management increased to 60 000 last year. Avis CEO Grenville Wilson lauds productivity improvements, cost controls and a buoyant used-car market for what he terms an "exceptional" performance from fleet services.
The car-rental business, meanwhile, enjoyed a good year. The summer tourism season was excellent, says Wilson. The Avis rental fleet reached a record 13 000 vehicles. Overall, rental days last year rose 13% and rental transactions 8%. The Scandinavian subsidiary, despite a downturn in corporate demand suffered by the region's rental industry as a whole, compensated in other sectors, to increase rental days by 17%.
Unlike its Durban neighbour McCarthy, Grindrod has blossomed through diversification to shed the "cyclical" tag. Since 1999, when an international shipping slump caused the company to announce substantial losses, Grindrod has diversified into logistics and other areas. The result: last year MD Ivan Clark announced a third consecutive year of growth.
Shipping earnings grew slightly (R104m against R100m in 2001) despite continued difficult conditions both locally and internationally. Freight and financial services were the main thrusts that boosted operating profit 45% to R206m, pretax profit 70% to R167m and EPS 43% to 174,9c.
The only question mark is the 107% gearing, following a R358m capex programme, mainly on ships. But analysts say this is not uncommon for ship owners. During the year, Grindrod bought a 40% stake in Unicorn Shipping formerly held by SA Marine Corp, and bought out Island View Storage from Tiger Brands. The liner shipping division, which had posted consistent losses for several years, was closed down.