Covid-19 is crippling large corporations, with Barloworld being the latest casualty. The company has embarked on a retrenchment consultation process, according to an internal memo seen by Fin24.
In the memo, circulated among staff of its automotive and logistics division on 8 May, the division’s CEO Kamogelo Mmutlana warned of the negative impact the lockdown is having on the business, despite restrictions shifting from Level 5 to Level 4.
Consultations for the S189 process have started with management.
“The consultation process for the Divisional Executive Committee (N-1) and the Functional and Business Unit Management Committees (N-2) has been completed. Consultations for Senior Management (N-3) are in progress and are due to be completed by the end of July,” the memo read.
A spokesperson for the company said it was in a closed period and was unable to comment or confirm the S189 process.
Despite economic activity slowly reopening, it has not been enough to change the company’s prospects.
“While the increase in economic activity is welcomed, unfortunately, it does not take us out of the woods yet, as volumes remain low,” Mmutlana said in the memo.
Employees who are unable to work from home, have been asked to take annual leave. If their annual leave is depleted they must take unpaid leave. Barloworld initially provided staff with 13 days of Special Covid-19 leave for the initial lockdown period.
In a voluntary trading update issued to shareholders on 23 April, Barloworld announced a number of “austerity” measures in response to Covid-19. Among these were a 25% temporary fee reduction for directors, suspension of retirement fund contributions for as long as a year, as well as a 12-month remuneration sacrifice plan for executive, senior, middle and junior or supervisory levels.
“Shareholders are advised that the board and management are prepared to take further active measures to reduce costs as the situation demands,” Barloworld said at the time.
Earlier in April, Barloworld also suffered a rating downgrade by Moody’s from Baa3, to Ba1, a consequence of the country’s downgrade to junk status.
“Moody’s reported that the downgrade to Ba1 from Baa3 reflects the fact that Barloworld is intrinsically linked to the macro environment of South Africa with close to 75% of revenue and operating profit derived in the country,” Barloworld said in a shareholder note issued on 3 April. However, Barloworld told shareholders that its earnings potential was “positively exposed” to its offshore investments, which provide geographic diversifcation.
Barloworld is one of the oldest companies in South Africa, having been founded in 1902. It is known for its logistics management services and provides fleet management and car rental services under the brand Avis, as well as equipment under the brand CAT.