News / Industry

Monday 06-10 November  2017

 

CORPORATE NEWS

A 23% surge in luxury watch and jewellery sales in Richemont’s largest market‚ Asia-Pacific‚ helped the group return to growth in the first half of its financial year. Measured in rand‚ Richemont’s interim sales remained flat at R84bn but its net profit jumped 66% to R14.6bn due to a low base set in the comparative period when it invested heavily in buying back slow-moving stock. In euros‚ the luxury brands group’s sales grew 10% to EUR5.6bn and its profit rose 80% to EUR974m‚ the company said in its results statement for the six months to end-September that were released on Friday.

 

Telecoms group Telkom on Friday reported a 7.4% drop in H1 HEPS to R3.04‚ which the company attributed to the tough economic environment. The company said that revenue for the six months to end-September dropped 0.6% to R20.10bn due to deferred corporate ICT spend‚ reduced spend in the public sector and pricing pressures in the wholesale environment. As a result‚ net profit slipped to R1.65bn‚ from R1.76bn in the year-earlier period. The interim dividend dropped 9.9% to R1.18.

 

ArcelorMittal SA said on Friday that it was able to increase local sales in the three months to September‚ as a result of the implementation of the safeguard measures aimed at limiting steel imports. Local sales were 6% higher in the review quarter‚ mainly due to higher local demand for flat steel products after the government implemented import duties on hot rolled coil products. Export sales rose 48.5%‚ with flat steel products increasing by 22‚000 tons and long steel products by 44‚000 tons.

 

The Share price of retail tycoon Christo Wiese’s property group Tradeholdrose 5% to R18.38 on Thursday morning after it reported nearly tripled revenue and asset value. Tradehold grew interim revenue 165.5% to GBP55.5m during the six months to end-August from the matching period in 2016. Finance costs of GBP 27m‚ however‚ saw its after-tax profit decline 23% to GBP12m. Its total assets at August 31 were GBP 994m‚ 161.7% growth from GBP380m in the previous year.

 

Stefanutti on Thursday reported a 15% drop in H1 HEPS to 44.81c‚ partly due to a higher tax rate. The company grew its revenue 18% to R5.2bn in the six months to end-August‚ from the year-earlier period. Operating profit was also up 18% to R119m. Capital expenditure was R255m‚ of which R203m relates to the roads‚ pipelines and mining services business unit. Of the total capital expenditure‚ R219m went to expanding capacity. The order book for the review period was R13.9bn.

 

Cement producer Sephaku’s share pricewas unchanged on Thursday morning‚ after the company reported that HEPS for the six months to end-September declined 42.5% to 7.06c. Sephaku‚ which owns 36% of the SA operations of Nigerian cement maker Dangote and 100% of concrete supplier Metier‚ said group net profit decreased 40.9% to R14.8m‚ partly due to heavy rains that affected production. Metier’s net profit decreased to R31.69m to R37.55m.

 

Trans Hex on Thursday reported an interim loss‚ as a result of several factors‚ including lower diamond prices. Net loss was R199.2m in the six months to end-September‚ swinging from a profit of R32.5m in the year-earlier period. Sales revenue from the SA operations dropped 45.6% to R149.7m‚ as the average diamond price dropped 20.1%‚ mainly due to a weaker market and a decrease in average stone size. A stronger rand and a 22.9% decrease in carats sold also affected sales revenue.

 

Brait’s share price rebounded 4% to R49.80 on Wednesday morning‚ as the market reacted to a trading statement it issued after the JSE closed on Tuesday‚ reassuring investors its UK clothing chain New Look remained solvent. The UK-focused investment group said it expected to report on November 15 that its net asset value per share had fallen as much as 37.7% at September 30 from the prior year’s R105.06. Measured in euros‚ the drop was as much as 40%. Brait did not provide guidance on what it expected the change in its basic or HEPS to be for its financial year to end-September.

 

Indluplace‚ the first focused residential real estate investment trust to be listed on the JSE‚ reported on Wednesday that its FY dividend rose 5.6% to 97.75c‚ which was in line with its guidance. Vacancy rates for the year to end-September held steady at 3.5%. Operating costs have increased from R130.6m to R153.3m. The company forecast dividend growth of between 4% and 7% for the 2018 financial year.

 

Financial services provider Purple Group reported on Wednesday that itslosses widened in the year to August‚ as a result of poor investment conditions. Headline loss per share widened to 6.42c from 0.37c in the previous comparative period. Purple owns online stockbroker Easy Equities; over-the-counter derivative trading businesses GT247.com and GT Private Broking; and Emperor Asset Management. Easy Equities opened 59‚550 new accounts. Client assets totalled R1.13bn.

 

AECI on Wednesday acquiredGerman chemicals producer Schirm from Imperial for EUR110.5m‚ the JSE-listed companies said. AECI said the deal was part of its international expansion strategy‚ and Schirm would operate as a standalone entity in what the group called its plant and animal health pillar. Schirm operates four manufacturing plants in Germany — Schönebeck‚ Wolfenbüttel‚ Lübeck and Baar-Ebenhausen — and one in Ennis‚ in the US.

 

TFG said on Tuesday it had agreedto buy British womenswear brand Hobbs for an undisclosed sum. Hobbs has 140 outlets‚ including standalone stores and concessions in the UK‚ and is stocked in selected departmental stores around the world‚ including Bloomingdales in the US and Wohrl and SinLeffers in Germany‚ according to TFG's statement. It also sells its merchandise online in 49 countries. UK media reported in July that TFG was in talks to acquire Hobbs.

 

Mr Price’s share pricejumped 11% to R169.99 on Tuesday morning after it said interim earnings grew by up to 25%. Mr Price said it expected to report on November 20 that its basic and HEPS for the 26 weeks to September 30 grew between 20% and 25%. Besides its flagship Mr Price clothing chain‚ the group owns Miladys‚ Sheet Street and MRP Home. It focuses on selling for cash‚ which appears to have given it an advantage in a tough consumer environment over rivals reliant on advancing customers credit.

 

Harmony Gold reported on Tuesday increased gold output and operating profit for the Q1 of its 2018 financial year‚ with the potential for further improvements coming from the addition of AngloGold Ashanti’s Moab Khotsong mining complex in coming months. Harmony produced 290‚644oz of gold in the September quarter‚ up from 277‚461oz in the year-earlier period. It reported a production profit of R1.397bn for the quarter compared with R1.369bn a year earlier and R1.176bn in the June quarter.

 

PPC’s share pricerose 5.8% to R7.53 on Tuesday morning after it said its profitability had improved thanks to “robust growth in Rwanda and Zimbabwe” and a significant reduction in finance fees. The cement maker said it expected to report on November 23 that HEPS for the six months to end-September grew between 30% and 40%. Basic EPS grew between 45% and 60%.

 

Group Five’s share price was little changed on Tuesday‚ despite the company providing additional details on a turnaround strategy first announced in October. The construction group said in a strategy update it would dispose of its manufacturing cluster as it shifts away from its historical focus on construction‚ towards infrastructure and investment.  Group Five’s share price shot up 14.5% on October 6‚ when the reformulated strategy was first announced‚ but has had a turbulent year.

 

AngloGold Ashanti on Monday reported an improved Q3 performance that kept it on course to deliver its FY production and cost targets. In the September quarter‚ AngloGold raised gold output to 997‚000oz‚ up by 11% compared to the same period a year earlier and 9% higher than the June quarter. AngloGold said it had USD88m of free cash flow for the quarter compared to USD41m in outflows during its June quarter as production increased from all its operating regions.

 

Redefine Properties is due to expand its offshore property platform with another foray into Eastern Europe. It will acquire a 25% stake in a GBP1bn retail portfolio of 28 well-established assets in Poland. CEO Andrew Konig said on Monday that Redefine would co-invest in a consortium with US investment management firm‚ Pacific Investment Management Company (Pimco)‚ and American asset manager Oaktree Capital Management‚ each of whom would have 37.5% of the portfolio being acquired.

 

US multinational Kraft Heinz is selling its 50.1% stake in its SA operations to joint-venture partner Pioneer Foods for an undisclosed amount. Pioneer said on Monday evening that it was turning Heinz Foods SA into a wholly-owned subsidiary. The deal allows Pioneer to manufacture Heinz’s flagship tomato sauce and other products for two years. Pioneer said it would distribute HP & Lea Perrins products and some other Kraft Heinz products.

 

Construction group Raubex said on Monday it was looking offshore for growth opportunities‚ which would cushion it from SA’s slowing economic growth. CEO Rudolf Fourie said that the company was looking for acquisitions that would bolster its materials division‚ which accounted for half its profits. Group pretax profit dropped 5% to R354.7m in the six months to end-August‚ as revenue dropped 2% to R4.67bn. The order book decreased 8.2% to R7.52bn.

 

Barloworld shares dipped as much as 3% in mid-afternoon trade on Monday‚ suggesting a degree of disappointment with an earlier trading update. The share price has had a good run over the past year‚ rising from about R84 to R136.02‚ according to Iress data. The industrial group expects HEPS from continuing operations to rise by between 10% and 20% in the in the year to September‚ from a year ago. 

ECONOMIC NEWS

Mining output contracted by 0.9% in September from the same month in 2016‚ a shock to economists who had expected only a small slowdown from August’s 7.9% growth. Diamond production fell 32.1% and iron ore production 20.7% in September from August‚ Stats SA reported on Thursday. Thanks to July’s 2.1% growth and August’s 7.9% growth‚ mining will make a positive contribution to SA’s Q3 GDP‚ despite the 0.9% slump in September.

 

Manufacturing production decreased 1.6% y/y in September 2017‚ data from Stats SA showed on Thursday. There was‚ however‚ a 1% rise in seasonally adjusted manufacturing production in the Q3  of 2017‚ when compared to the second‚ with six of the ten manufacturing divisions reporting positive growth rates over this period. September PMI suggested a slight improvement but the index still remains below the neutral 50 mark‚ which divides expansion from contraction.

 

IMF‚ in a visit to SA this week‚ said the country will see little improvement in 2018. The visit‚ between October 30 and November 8‚ focused on recent economic developments. Ana Lucía Coronel‚ who led the visit‚ said on Wednesday that the fund sees little improvement for SA after Treasury cut its GDP forecast from 1.1% to 0.7% MTBPS at the end of October. Coronel also urged the Presidential fiscal committee‚ recently set up to approve fiscal measures “to avoid undue increases in debt-to-GDP ratio”.

 

SA’s bulk export volumes soared by 30.7% y/y in October to a new record of 16.7m tons according to Transnet National Ports Authority (TNPA). The previous record of 16.4m tons was set in January 2015. This brought the increase for the first ten months to 7.5%. Bulk exports out of Saldanha‚ which are mostly iron ore‚ rocketed by 64.3% in October to 6.6m tons after two consecutive months when exports out of this port were less than 4m tons.

 

The highest risks to SA’s financial stability are its deteriorating public finances and rising government guarantees to state-owned enterprises (SOEs)‚ the Reserve Bank said on Thursday. In its latest financial stability review‚ released on Thursday‚ the Bank said that defaults by SOEs on their debt obligations could hit both government finances and other financial institutions exposed to these enterprises.

 

Moody’s says a stable outlook for sovereign creditworthiness globally makes SA an outlier with a negative outlook.  According to Moody’s 2018 Sovereign Outlook‚ healthy growth is likely to continue into 2018. Moody’s also says there were almost half as many sovereign downgrades in 2017 (20) than in 2016 (37)‚ which were mostly concentrated in Sub-Saharan Africa and the Middle East.

 

SA is unlikely to take advantage of the improving global economic outlook‚ according to Sacci. After the Sacci Business Confidence Index (BCI) recovered from its lowest level this year in August 2017 by 3.4 index points to 93 in September‚ it dropped slightly to 92.9 October. The figure indicates that business confidence remains persistently low. The average for the BCI in the first 10 months of 2017 was 94.1 compared with 93.4 for the corresponding period of 2016‚ and 101.2 for the first 10 months of 2015.

 

Tractor sales surged 24.2% y/y in October to 704 units‚ according to Saama. In 2016 the country experienced an 11.3% fall to 5‚855 units‚ when drought conditions prevailed in the summer rainfall area. Industry expectations for 2017 are that overall tractor sales should be at least as good as those in 2016. In the first ten months of 2017‚ tractor sales were up 6.5% y/y.

SOURCE: BDPro

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