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METAIR INVESTMENTS LIMITED - Covid-19 response strategy

Release Date: 14/05/2020 10:40
Code(s): MTA     PDF:  
Wrap Text
Covid-19 response strategy

Metair Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1948/031013/06)
ISIN: ZAE000090692
Share code: MTA
(“Metair” or the “Company”)


Metair shareholders (“Shareholders”) are referred to the COVID-19 (coronavirus) response
statement, operational update, postponement of dividend and trading statement announcement
published on SENS on 30 March 2020. Shareholders are hereby provided with an overview of the
Company’s COVID-19 response strategy (“Strategy”).

Our approach
From the onset, the approach of the board of directors of Metair (“Board”) was to prioritise and design
a structured Strategy. This Strategy was based on our belief that COVID-19 is going to be with us for
a long time, possibly for 18 months until there is a vaccine.

We believe the challenge must be taken on with a positive, forward-thinking attitude and an increased
level of governance and leadership. Underpinned by a solution-driven, never-surrender approach, we
set out to design our Strategy for each region, as each country in which we operate has different
COVID-19 risk management strategies.

Our Strategy is built on 6 major pillars, being:
   - Employee health, safety, welfare and communication;
   - Health and safety of the business by focusing on the solvency and liquidity of Metair and its
   - Increased government interaction and best possible risk level economic participation;
   - COVID-19 exit plan;
   - COVID-19 recovery plan (“Vision 2022”); and
   - Increased governance and leadership.

Pillar 1: Employee health and safety, welfare, and communication

The welfare, health and safety of our employees is both a priority and a key concern. Following the
South African government’s declaration of a national lockdown, effective 26 March 2020
(“Lockdown”), we ensured that our factories were locked down safely, that our employees got home
safely and that we had the required mass communication systems via SMS and Human Resources
emergency lines in place.

The lockdown periods in the various countries of our operations temporarily suspended the normal
employer-employee relationship and we had to enter into new employment arrangements. We aimed
to protect the most vulnerable, to be just and fair, and took the view that government support must be
forthcoming but will take some time to be implemented.

The Board approved management’s request to support our hourly paid employees in South Africa
with a monthly company welfare allowance of R3 500 for the duration of the level 5 stage of the
Lockdown. In addition, combined with government support, we aimed to get an operator level
employee to between 50% and 90% of their cost to company.

We took the decision to share the hardships of the Lockdown with salaried employees and appreciate
the sacrifices made by all employees as they dropped to 50% of normal pay. In line with our initial
view that the level 5 stage of the Lockdown could potentially last for 3 months, we informed salaried
employees that our support for the first month will be at 50% of normal pay, the second month will be
25% of normal pay, and the third month will be R3 500 per employee.

To date, we are aware of 2 COVID-19 cases amongst our staff compliment in South Africa.

In Turkey, the government took a very different COVID-19 risk management approach and to date we
have had 19 COVID-19 cases and 102 tracked and traced employees under self-quarantine.

All Metair subsidiaries (“Subsidiaries”) have policies to ensure a safe working environment and to
prevent the spread of COVID-19. The policies are in accordance with section 8(1) of the Occupational
Health and Safety Act 85 of 1993, as well as other regulations in their specific jurisdictions.

The policies have specific provisions to address employees who show symptoms for COVID-19
during on-site screening. There are on-site isolation facilities and transportation arrangements to
transfer employees suspected to have the virus to designated COVID-19 healthcare facilities for
further testing. Positive cases are isolated/treated appropriately, in terms of the country-specific health
authority and government protocols. The Subsidiaries will keep in regular contact to monitor progress
and will only approve an employee’s return to work when he or she has tested negative and deemed
to have recovered.

The Subsidiaries will also actively track, trace, and communicate with all contacts of an individual who
tests positive and ensure that they are separated from the group during shifts and quarantined where

We immediately registered for all government announced employee support programs. In South
Africa, all of our businesses were successful in registering with Unemployment Insurance Fund (“UIF”)
for the Temporary Employee-Employer Relief Scheme program and in most cases the flow of funds
for March and April have been effected. We thank the Department of Employment and Labour
(“Department”) for their hard work and availability during this period. We entered into the required
Memorandum of Agreement (“MOA”) with the Department and are appreciative of the amendments
they accommodated in the MOA, especially the removal of the clause that would have disqualified
any company that made any welfare payments to employees from participating in the UIF. This was a
major shift in the support structure.

Although we had initial challenges, most of those have been resolved. In South Africa, support is at
38% of normal pay, capped to a maximum of R17 000 per month, therefore limiting the maximum
support for any individual employee to about R 6 500 per month.

Turkey is at 50% support for employees who are temporarily unemployed. Romania is at 75% but
capped at an average rate with the Romanian lockdown scheduled to end on 18 May 2020. The
United Kingdom is set at 80% of a maximum level.

In Germany, government support is at 100%, however businesses are already dealing with the market
effect caused by the pandemic. Metair’s 25% associate investment, Akkumulatorenfabrik Möll
(“Möll”), applied for liquidation as shareholders decided not to inject more capital into the business.
Metair will review the potential write down of the investment in Möll once the liquidator’s final business
review and recommendations have been received.

In Kenya we were allowed to operate fully, but under strict health and safety measures. The total
employee welfare cost to date is R52 million.

Pillar 2: Health and safety of the business by focusing on Metair’s solvency and liquidity

Our business design proved to be robust as we own all our major factories and have no rental
obligations. We deferred all major capital and project expenses, including dividend payments. We
modelled a worst case scenario taking into consideration that the level 5 stage of the Lockdown could
potentially last for 3 months.

Now that we are easing into the level 4 stage of the Lockdown in South Africa, at a 50% capacity
level, we know that we need a stable and fully utilised capacity for optimal performance. As we
graphically displayed to the Board and Shareholders in the 2008/2009 financial crisis, Metair
businesses operate best in a market pull scenario with a stable production environment and a buffer
between us and the market. We now need to respond directly to new unknown market conditions,
resulting in a push system that will allow us to learn our new market, but this will take some time. This
means that the financial impact of running at 50% capacity levels could be the same as being in a
complete lockdown.

Pillar 3: Increased government interaction and achieving the best possible risk level economic

If one takes the view that the COVID-19 challenge could be with us for a long time, and that we are
going to oscillate between various risk levels over the next 18 months, it is very important to
structurally achieve the best possible economic participation approval level.

Initially, our business was classified as a Level 3 economic participant. After extensive lobbying and
interaction with industry bodies such as National Association of Automobile Manufacturers of South
Africa (NAAMSA), National Association of Automotive Component and Allied Manufacturer
(NAACAM), Trade and Industrial Policy Strategies (TIPS) and Retail Motor Industry (RMI), we
managed to achieve a Level 4 economic participation classification.

We would like to thank the Department of Trade and Industry, Minister Patel, and the CEOs of the
above industry bodies for their accommodation and approachability during this period.

In addition, First National Batteries (“FNB”) managed to be classified as an essential service provider.
Structurally, we achieved the best possible economic participation position at an applied level 4 risk

Pillar 4: COVID-19 exit plan

We realised very early on that we will need a well-structured COVID-19 exit plan and set out to design
best practice return to work standard operating manuals and training programs.

Standard operating manuals to start manufacturing were approved and we concluded internal start up
readiness self-assessments. In South Africa, as of 4 May 2020, our selected employees returned to
work supplied with the required personal protective equipment and training and are implementing the
new standard operating procedures.

The return to work processes have run smoothly with only some minor labour incidents experienced
as businesses deal with the difficulty of selecting, allocating and rotating employees according to the
government imposed 50% employee participation rate. We believe the labour relationship
environment will remain challenging and fragile during a partial return to work scenario.

We are also executing an external legal compliance audit in respect of the Disaster Management Act,
No. 57 of 2002 at FNB and will use the legislative landscape list to roll out to all businesses.
To date, the extraordinary start-up cost required under our return to work policies, regulations and
procedures is estimated at R13 million for 2020.

Pillar 5: COVID-19 recovery plan (Vision 2022)

In addition to executing all of the activities required to manage the COVID-19 risks, we also wanted to
create our future vision: Vision 2022, which will shape our designed recovery.

Our focus is to design a multi-stepped U-shaped recovery and avoid an L-shaped recovery curve. The
Automotive Components Vertical recovery is a project-based recovery that can alter a potential
L-shaped recovery to a U-shaped recovery. All Subsidiaries have presented their current view on
COVID-19 recovery plans to Metair.

Metair needs to focus on the new model launch projects and ensure optimal execution on them, as
well as focus on the selection of the most sustainable projects, customer, models, and markets.

The Energy Vertical recovery is based on an aftermarket demand, market share, brand positioning,
economic range expansion and Original Equipment Manufacturer (“OEM") projects. We are currently
completely disconnected from the OEM and aftermarket demand, and we will look to structurally
adapt our cost base and business activities with the first wave of market adjustments. We will
therefore increase our interaction, transparency, communication, and customer engagements as we
aim to gain insight into the new market conditions as soon as possible. As the outlook remains fairly
fluid, we do acknowledge that it will take many revisions, several interactions, and some time for
absolute clarity to be achieved.

Pillar 6: Increased governance and leadership

We believe it is important to lead and set the example from the front during this period.

Theo Loock, Chief Executive Officer of Metair, said “I would like to thank the Metair team, subsidiary
executives and leadership teams, and the Board for their presence, availability and focus during this
period. Further thanks are extended to the Board and committee chairpersons for their presence and
input, with a special thank you to Mr Brand Pretorius, our Chairman, for always being available during
this period and for his positive encouragement and support.”

Update on the strategic review process

The Boards review of the Company’s strategy as well as the policies and processes that enable the
execution of the Company’s core purpose and alignment with our values, as set out in the integrated
report for the year ended 31 December 2019, is still in progress (“Strategic Review”). We have
adjusted out our internal timing for the completion of certain workstreams in respect of the Strategic
Review, however the Board remains committed to delivering on initiatives designed to enhance
shareholder value.

14 May 2020

One Capital

Date: 14-05-2020 10:40:00
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