News / Industry

Monday 17 - 21 July 2017

CORPORATE NEWS

Liberty said on Friday it had maintained its interim dividend at R2.76 despite lower revenue and profit. The insurance company reported that total revenue for H1 to end-June declined 5.2% to R35.8bn and aftertax profit declined 9.5% to R1.8bn. The group’s headline earnings declined 15% to R1.5bn‚ dragged down by a R118m loss at Stanlib rest of Africa and a R19m loss from Liberty Health.

 

Paper and pulp group Mondi on Thursday suffered a 6% drop in its H1 underlying profit to EUR 497m. This was mainly driven by a significantly lower forestry fair value gain in SA and the impact of mill maintenance shuts‚ the company said. Forestry gains are dependent on a variety of external factors‚ the most significant of which are the export price of timber and the exchange rate.

 

Sappi shares wobbled on Thursday‚ losing 2%‚ after the company forecasted lower operating performance in its Q4. Excluding special items‚ EPS held steady at 11 US cents in the three months to June‚ from a year-earlier period. Higher raw material prices and a stronger rand also offset higher volumes‚ leaving operating profit excluding special items down to $93m for the quarter from $97m in the matching period in 2016. The company reduced net debt 17% to $1.31bn.

 

MTN interim results showed on Thursday the company suffered a 19% plunge in interim revenue to R64bn for H1 to end-June from R79bn. MTN said that group revenue in constant currency grew by 6.7% to R64bn. MTN maintained its interim dividend at R2.50. Overall subscriber numbers in the period decreased by 3.6% to 231.8m‚ mainly due to drops in Nigeria and Ghana.  MTN said it grew its subscriber base in SA by 1.5% to 31.2m and its revenue 1.6% to R20bn.

 

Nedbank’s impressive growth in interest and fee income was marred by a R1.2bn loss contributed by its pan-African banking associate Ecobank Transnational Incorporated‚ causing the group’s overall interim profit to decline slightly. The results the bank released on Wednesday showed that it, however, raised its interim dividend of 7% to R6.10 despite its aftertax profit falling 1.3% to R5.58bn from R5.65bn.

 

Italtile announced on Tuesday it expected FY headline profit to drop slightly as sluggish economic growth weighed on consumer and business spending. In a trading update ‚ Italtile expected HEPS in the year to June to drop by 2.8%‚ from the same period a year ago. It said consumers reduced discretionary spend on home improvements and renovations.

 

TFG said on Tuesday it had raised R2.5bn through an accelerated bookbuild process. The funds raised would go towards the recent acquisition of Retail Apparel Group. TFG is the latest retail group from SA to enter the Australian market‚ following in the footsteps of Woolworths‚ which has a significant presence there after acquiring David Jones a few years ago.

 

Pick n Pay’s share price fell 3.4% to R59.26 on Monday after it warned shareholders retrenchment costs would drag down its interim HEPS by more than 20%. The grocery chain said its HEPS for the 26 weeks to August 27 would be at least 16c lower than the 82.43c reported in the matching period. In April‚ Pick n Pay launched a voluntary severance programme offering employees one-and-a-half weeks of pay for each completed year of service‚ plus four weeks of notice pay.

 

Bidvest announced on Monday that it was acquiring Irish facilities management group Noonan for EUR175m. Noonan employed more than 13‚000 people and besides Ireland operated throughout the UK‚ from where 40% of its revenue was derived‚ Bidvest said. The JSE-listed group said it had secured a three-year euro-denominated loan at an attractive rate to finance the acquisition.

 

Aveng’s share price initially jumped as much as 9% to R6.37 on Monday after saying it had been awarded AUD50.5m to settle a disputed payment for the Queensland Curtis Liquefied Natural Gas pipeline project. But the share subsequently fell 4.6% to R5.55 as the market digested that the group expected its headline loss per share for the year to end-June to worsen by more than 20%.

 

Liberty Two Degrees declared a distribution of 30c/share in H1 to end-June on Monday. The real estate investment trust‚ which listed on the JSE in 2016‚ owns portions of some of SA’s most iconic properties‚ including Sandton City and Eastgate. Net rental income for the review period leapt to R177.55m from R28.64m‚ while portfolio vacancy rate dropped to 3.3% from 4.6%.

 

Adcorp reported on Monday that CEO Richard Pike and COO Nelis Swart were parting ways with the company with immediate effect. The company said the departure of the two came shortly after a board reshuffle in which Wiphold founder Gloria Serobe was appointed chairwoman and ex minister Sydney Mufamadi joined the board on July 11. A new CEO had been selected‚ but his identity and start date would be announced only once he has finalised his exit arrangement with his current employer.

 

Tower Property Fund achieved double-digit distribution growth “in an extremely challenging operating environment” in the year to end-May 2017‚ increasing revenue by 19% to R447m and distributable earnings by 18% to R262m. The company reported on Monday that during the year‚ it diversified its portfolio with the acquisition of a R1bn retail property portfolio in Croatia comprising four shopping centres. This brings the value of Tower’s properties in the country to R1.4bn.

 

Rising aluminium prices compensated for a stronger rand to help local manufacturer Hulamin grow profit on nearly flat revenue. On Monday Hulamin reported that its interim revenue for the six months to end-June grew 3% to R5.1bn while aftertax profit grew 17% to R178m. The London Metal Exchange aluminium price rose to USD1‚900/tonne by the end of reporting period‚ 27% higher than lows of below USD1‚500/tonne that prevailed in late 2015 and early 2016.

 

Ferrum Crescent’s share price was unchanged at 2c on Monday‚ after news it had now disposed of its South African assets, and had met its capital raising target for its Spanish lead-zinc operations.

 

ECONOMIC NEWS

SA Sugar Association said on Friday the sugar industry could take years to recover from the effects of the 2015-16 drought which had led to the industry failing to meet export orders.  It said drought resulted in a 53% decrease in production in some areas‚ along with the unprecedented closure of two mills‚ while other mills had a shorter than normal milling season. Executive director Trix Trikam said while the production of sugar was sufficient to supply local demand‚ export supply had to be curtailed.

 

Vuyani Jarana was appointed SAA CEO. The Treasury announced on Thursday that he would commence his duties after his current employer had officially released him. Jarana had‚ among other successes‚ transformed and positioned Vodacom Business as a growth engine of the Vodacom group.

 

A survey by Markit revealed on Thursday that business conditions in SA have improved slightly‚ breaching the neutral 50 level‚ but still remained weak. Readings above the neutral 50 showed an improvement in business conditions. Indices tracking new orders‚ employment and stocks of purchases climbed above 50 while those tracking output remained in contractionary territory.

 

The Chamber of Mines on Tuesday accused the Department of Mineral Resources of freezing all mineral and prospecting right applications as well as rights transfers despite the moratorium proposed by mines minister Mosebenzi Zwane being open for comment.

 

Local and export sales of new vehicles surged in July‚ bringing respite to motor companies for which 2017 has mostly been a difficult year. The National Association of Automobile Manufacturers said on Tuesday a 6.2% increase in new car sales in July was an “encouraging turnaround”. The motor industry sold 30‚826 cars last month‚ compared to 29‚035 in the same month a year earlier.

 

Property expert Johan Loos warned home owners on Tuesday not to be too hasty to sell their houses just yet. In his release of FNB’s property barometer, he said it was becoming increasingly likely that this year would be the second consecutive year of real house-price correction. Loos said the FNB house price index showed a slowdown in y/y growth in July 2017.

 

Absa said on Tuesday the performance of the manufacturing sector in SA remained most disappointing, against the backdrop of well-above 50 readings for the PMIs in some of SA’s major trading partners‚ including the eurozone and the US. This was after the bank's PMI revealed that it had dipped further‚ spelling bad news for the manufacturing sector. After falling below the neutral 50-point mark in June‚ the index slumped from 46.7 points to 42.9 in July — with all five subindices weakening.

 

Reserve Bank governor Lesetja Kganyago said on Tuesday the response by the domestic economy to current world growth was “unusually weak”. The governor said the contraction in real GDP in Q1 had been broad-based‚ with confidence weakening in quarter two 'possibly exaggerated somewhat by the political environment'. The bank had forecasted growth of 0.5% for SA in 2017 and 1.2% in 2018.

 

SA’s private sector credit growth moderated more than expected in June‚ suggesting low levels of business and consumer confidence. According to Reserve Bank data released on Monday, growth in extension of credit to the private sector — consumers and business — moderated to an annualised 6.16% in June from 6.69% in May. Analysts had expected growth in the private sector credit to have eased to 6.5% in the review period.

 

SA recorded a better than expected trade surplus of R10.67bn in June‚ from a revised R7.22bn surplus in May. SARS said on Monday May’s adjustment came as a result of “ongoing vouchers of correction”. June’s R10.67bn surplus was higher than the Bloomberg consensus forecast for a R9.4bn surplus. Trading economics had forecast a surplus of R8bn. The surplus in June was a result of R102.14bn in exports and imports of R91.47bn.

 

Statistics SA reported on Monday that SA’s population grew to 56.52m by the middle of 2017‚ which is 102‚000 more people than the country had in the same period in 2016. However‚ the country found itself in a dilemma‚ where the portion of the population in retirement age had increased‚ while the birth rate had slowed‚ and so has growth in the youth population. 

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