News / Industry

Monday 17 - 21 July 2017

CORPORATE NEWS

Old Mutual reported on Friday it had raised its interim dividend by 32% to 3.53p for the six months to end-June. Thanks to the pound weakening against the rand‚ this would translate into a 40% increase to 65c for its JSE investors. The insurance group’s interim revenue grew 45% to £10.8bn and its aftertax profit grew 60% to £679m. Old Mutual cut its debt repayment costs by £10m to £35m in the first half of its financial year‚ and intended trimming this to £21m by the end of 2017‚ CEO Bruce Hemphill said.

 

Private-equity group Capitalworks offered Sovereign shareholders two options as it sought to acquire a sizable interest in the poultry producer, the two companies said on Thursday. They said they had entered into an implementation agreement which would ultimately lead the de-listing of Sovereign from the JSE. Shareholders would either be offered R12/share‚ at 7% interest should the cash not be paid by 1 January 2018‚ or a share in a special interest vehicle at the same price.

 

British American Tobacco (BAT) said on Thursday it had raised $17.25bn via a bond issue. The proceeds would help finance the acquisition of Reynolds American in a $47bn-plus deal‚ which BAT concluded late in August. BAT is the biggest share on the JSE‚ with a market capitalisation of R2.1-trillion‚ followed by Naspers with a market valuation of R1.26-trillion. Reynolds is the number two player in the US market‚ with three out of the four top-selling cigarette brands.

 

The share price of UK-focused real estate investment trust Capital & Regional rose more than 5% on Thursday‚ after the company declared an interim dividend of 1.73p. Adjusted profits for the H1 ended June 30 rose 6.6% to £14.5m‚ and the company said it expected a fourth consecutive year of FY profit growth. Net rental income declined to £25m from £25.4m in the year-earlier period‚ while adjusted profit rose to £14.5m from £13.6m — attributed to cost-cutting.

 

Packaging group Mpact halved its interim dividend to 15c from 30c for the six months to end-June‚ the company said on Tuesday. Mpact grew revenue 3% to R4.8bn, but profit plunged to R52m‚ a third of the matching period’s R155m. The group has two divisions: paper‚ which suffered a 39% drop in operating profit to R177m; and plastic‚ which suffered a 61% drop in operating profit to R27m.

 

UK-focused investment holding company Brait’s share price tumbled 7.5% to R59 on Tuesday morning after it released its June quarter update. Brait said its net asset value (NAV) per share declined 5.1% to R74.14 at June 30 from R78.15 at March 31. Its update for the first quarter of its financial year contained less information than provided in 2016‚ when its NAV was reported at R131.94. Brait has been a major victim of the pound’s tumble after the UK’s Brexit vote in June 2016.

 

Shoprite’s share price fell 5.6% to R197.28 on Monday morning, while Steinhoff’s gained 2.5% to R70.55 as the market reacted to retail tycoon Christo Wiese’s latest merger plan. On Friday at 4.50pm‚ Steinhoff said its chairman Wiese would gain half of Shoprite’s voting rights by exercising a call option. Wiese’s new move to merge Steinhoff’s South African retailers would lead to a new company‚ called Steinhoff Africa Retail (Star)‚ listed on the JSE.

 

Lonmin said on Monday it would sell or seek partners for its Limpopo and Akanani projects‚ sell excess capacity in its smelting and refining business and bring funding partners into its K4 and Rowland mines as the company continues to battle with the difficult economics besetting the platinum industry. Lonmin has undertaken a business review despite having just come through a process to shut unprofitable mines and cut thousands of jobs.

 

Net1 UEPS Technologies said on Monday it had concluded its investments in Cell C and DNI‚ which is the wholesaler of Cell C starter packs in SA. Net1 acquired a 15% interest in SA’s third mobile operator for R2bn in a deal that would be settled in cash and debt. The JSE and Nasdaq listed company also acquired a 45% direct interest in DNI for R945m in cash.

 

ECONOMIC NEWS

The mining sector slumped slightly in June, but the sector would still contribute positively to the Q2 GDP. Mining production increased by 3.6% y/y in May after rising 1.6% in April‚ surprising many economists. In June‚ however‚ mining production decreased marginally‚ by 0.8%‚ y/y. Seasonally adjusted mining production increased by 0.6% in the Q2 of 2017 compared with the Q1 of 2017. The biggest positive contributor was manganese ore‚ which contributed 1.1 percentage points.

 

Manufacturing production increased in the Q2 of the year, indicating SA may be heading out of recession. Manufacturing production increased by 1.5% in the Q2 of 2017 compared with the Q1‚ with six of the 10 manufacturing divisions reporting positive growth rates over this period. Output from the sector experienced a significant drop in June — falling 2.3% from a year earlier. Manufacturing production fell by 0.8% y/y in May after shrinking 4.1% from a year earlier in April.

 

Business confidence improved slightly in July as recent data‚ including mining and manufacturing figures‚ pointed to slightly positive growth, Sacci said on Tuesday. Sacci said business confidence had regained some ground that was lost due to political developments‚ policy uncertainty and the credit rating downgrades. The Sacci Business Confidence index was up 0.4 index points to 95.3 in July 2017 from 94.9 in June 2017 and was 0.7 index points lower than in July 2016.

 

SA’s unemployment rate remained unchanged at 27.7% in the June quarter from the March quarter‚ dashing hopes of a slight improvement. The overall number of employed South Africans fell by 150‚000 to 22.3m‚ Statistics SA said on Monday. SA’s working age population grew by 157‚000 to 37.2m. The number of formal sector jobs fell by 144‚000 from March to June. Worst hit was construction‚ where 110‚000 jobs were lost over the quarter‚ while the mining industry shed 13‚000 jobs.

 

SA’s gross foreign reserves fell $606m to $46.7bn in July‚ the Reserve Bank said on Monday. The drop in gross reserves‚ which include gold and foreign exchange‚ was mainly the result of foreign exchange swaps that were conducted to boost liquidity. The central bank also said foreign exchange payments were made on behalf of the government during the review period. The international liquidity position was up $179m to $42.4bn.

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