Our opinion on the current state of BAW

Barloworld (BAW) is a prominent international supplier of heavy earth-moving equipment and vehicles across various sectors, including mining, agriculture, infrastructure, power, automotive, and logistics. With operations spanning 24 countries, particularly in Southern Africa, Russia, and other emerging markets, Barloworld boasts a diverse portfolio that provides some resilience against economic downturns.

The company's renowned brands like Caterpillar, Avis, Massey-Ferguson, and Challenger contribute to its strong market presence. Barloworld recently divested its Spanish and Portuguese operations, freeing up funds for potential investments, such as the acquisition of the US-owned Wagner Asia Group in Mongolia.

While geopolitical tensions, especially the Ukraine crisis, have posed challenges in receiving payments from Russian customers and impacted commodity prices, Barloworld remains financially equipped to navigate these uncertainties. Despite experiencing a decline in share price, the company reported positive results for the fiscal year ending September 2023, with revenue from continuing operations increasing by 14% and headline earnings per share (HEPS) rising by 5.5%.

In subsequent trading updates, Barloworld reported revenue decreases attributed to the mining sector slowdown and geopolitical conflicts. However, the company's EBITDA margin improved, indicating operational efficiency despite revenue challenges.

From a technical perspective, Barloworld's share price experienced significant fluctuations in response to the COVID-19 pandemic but showed signs of recovery with an upside breakout from an extended "island formation" and a breakthrough of its long-term downward trendline. While the share price has been drifting sideways and downwards since January 2022, it is perceived as good value at current levels, especially considering its low price-to-earnings (P/E) ratio of 4.65.

Barloworld's strategic initiatives, including the share buyback program, demonstrate confidence in its future prospects. However, ongoing developments in Ukraine and Russia will continue to influence the company's performance and investor sentiment.