News / Industry

Monday 23- 27 October 2017

 

CORPORATE NEWS

CoAL share price jumpedmore than 4% on Friday‚ after it said its board had recommended shareholders approve a 20-to-1 share consolidation as it continued to rationalise its balance sheet. The company was also considering the number of bourses it is listed on. The JSE-and London-listed company said it had a disproportionately large number of shares in issue due to historical equity-based capital raisings‚ and this was a disincentive for institutional investors to invest in CoAL as their mandates inhibited them from investing in stocks where unit prices were too low.

 

Investment group Long4Life saidon Friday it would consider paying dividends by the end of its financial year in February‚ subject to its operating income. Founded by businessman Brian Joffe‚ the company listed on the JSE in April and managed to raise R2bn‚ which it used to acquire investments‚ primarily in the personal care and wellness‚ and sport and recreation sectors. The latest acquisition was Gauteng-based Inhle Beverages‚ which specialises in the canning and bottling of carbonated soft drinks‚ natural mineral water and energy drinks.

 

Lewis fell 0.75%to R26.30 on Friday morning after it warned shareholders its interim earnings would decline by up to 18%. Lewis said that it expected to report on November 13 that its HEPS for the six months to end-September would fall by between 12% and 18%. In Friday’s statement‚ Lewis repeated past complaints that it was suffering from the government’s crackdown on hire-purchase sales. Merchandise sales reflected a steady improvement over the period‚ increasing by 5% on last year. Revenue declined by 3.2%‚ mainly as a result of the 9.8% decline in other revenue over the corresponding prior period. Gross profit margin strengthened by 40 basis points to 40.9%.

 

PPC’s share price jumped 6.5% to R7.07 on Friday morning after Swiss building material group LafargeHolcim emerged as a rival bidder to Fairfax and AfriSam. Both PPC and LafargeHolcim issued statements saying they were in talks regarding a “possible transaction in Africa”. PPC’s share price rising to R7.07 puts it 23% above the R5.75 offer from Canadian fund manager Fairfax‚ which is dependent on PPC agreeing to merge with AfriSam.

 

Raising beer prices helped Anheuser-Busch InBev grow its SA revenue 3.9% in the September quarter‚ despite the volume it sold falling 2.5%. The world’s largest brewer reported on Thursday that its total revenue grew 3.6% to USD14.7bn for the September quarter‚ while the volume of beer it sold globally declined 1.2% to 161m hectolitres from the matching quarter in 2016. AB InBev shareholders would receive a EUR1.6 interim dividend for the H1 of its financial year. The group said it raised its revenue per hectolitre in SA by 6.6%‚ and the 3.9% decline in volumes sold “primarily resulted from the phasing of inventory levels between the second and third quarters due to the timing of our price increases”.

 

Fast-moving consumer goods group AVI’s share pricerose 4% to R98.45 on Thursday morning‚ after AVI announced the potential sale of some of its businesses. Its board had appointed Rand Merchant Bank to assist in evaluating these offers. AVI’s subsidiaries range from food to cosmetics and also include shoe makers Spitz and Green Cross. Its food and beverages brands include Five Roses tea‚ Bakers biscuits‚ Willards chips and I&J frozen fish.

 

Retail group Clicks announced on Thursday it grew its total revenue by 11% to R28.3bn and its after-tax profit by 16.8% to R1.3bn for the year to end-August. It declared a final dividend of R2.34‚ taking the total for the year to R3.22‚ an 18.4% increase in the prior year. Besides its flagship Clicks stores‚ the group is the southern African franchisee of UK cosmetics chain The Body Shop and also GNC and Claire’s. These health and beauty focused brands grew their sales by 14.7%‚ partly thanks to an aggressive roll-out of new stores.

 

Sibanye-Stillwater said on Thursday its annual production would be at the upper end of its forecasts‚ but warned of a deep plunge into an attributable loss for the year. Sibanye‚ which is fresh from raising USD2.5bn to pay for the purchase of America’s Stillwater Mining‚ a palladium and platinum miner‚ said it would report an attributable loss of at least R4.6bn for the year to end-December compared with earnings of R3.7bn for the previous year. Sibanye said its earnings would be negatively affected by impairments‚ provisions for health claims‚ the cost of the Stillwater transaction‚ and differences in commodity prices and exchange rates.

 

Share price of Curro’s JSE-listed tertiary education arm‚ Stadio‚ dropped as much as 5% on Thursday‚ after the company said it had acquired 100% of fashion school‚ Lisof. The acquisition of Lisof‚ one of SA’s leading fashion design schools and retail institutions‚ which is a registered higher education institution‚ would complement Stadio’s recent acquisition of the film-school Afda‚ and expand the company’s offering in education for the creative economy‚ Stadio said.

 

Anglo American‚ one of the world’s large diversified mining companies‚ reported an overall increase in quarterly production from the group‚ but its coal operations in SA‚ Colombia and Australia were obvious laggards. Converting all its production to a copper equivalent‚ Anglo reported a 6% y/y increase in output for the 3 months to end-September and an 8% increase for the first 9 months of the year. One of the highlights for the group was an increase of 1m tons in annual iron ore output from its Kumba Iron Ore subsidiary in SA‚ and higher production from 85% held De Beers.

 

Anglo American Platinum (Amplats) on Tuesday lowered its FY production and refined metal output targets because of two mines no longer supplying it metal‚ and the suspension of the Mototolo joint venture concentrator. Amplats lowered its production forecast by 50‚000oz to a range of between 2.3m and 2.35m oz for the year to end-December‚ because of the removal of 90‚000oz of unprofitable production from the now mothballed Bokoni mine it shared with Atlatsa Resources and the suspended Maseve mine. The open cast Mogalakwena mine would offset the reduced supply with concentrate from third parties. Bokoni would have supplied 30‚000oz.

 

MTN reported on Tuesday it had lost subscribersin most of its key markets in the September quarter‚ but raised its average revenue in local currencies from those who remained. Measured in rand‚ however‚ the mobile network operator’s total revenue declined by 13.4%‚ it said in a quarterly operating update on Tuesday morning. Its largest market‚ Nigeria‚ saw customer numbers fall 5.2% to 50.3m. MTN Nigeria reported an 11.2% increase in total revenue measured in naira supported by data revenue growth of 72.1%. In SA‚ MTN’s overall subscriber numbers declined by 1% to 30.9m.

 

Kumba Iron Ore increased its FY production target by 1m tons despite a dip in Q3 output, the company reported on Tuesday. Kumba increased its production forecast for 2017 to between 42m tons and 44m tons. The improved production would come from its flagship Sishen mine in the Northern Cape. The mine’s output target for the year was bumped up by 1m tons to between 29m and 30m tons. For the September quarter‚ iron ore production fell by 2% y/y to 11.5m tons because of lower output at Sishen.

 

ArcelorMittal SA said on Tuesday that CEO Wim de Klerk was to retire in January. De Klerk has been at the helm for a little more than a year at the struggling steel producer‚ taking over from Paul O’Flaherty‚ who also had a brief stint at the company. O’Flaherty held the job for about 18 months. SA’s biggest steel producer has‚ for some time‚ been battling low steel demand and rising input costs‚ compounded by cheap steel imports. The company said it is searching for a replacement for De Klerk.

 

Pick n Pay said on Tuesday that it was cutting prices on another 500 essential items to help ease pressure on consumers in the lead-up to the festive December period. The grocery retailer said it would be introducing more than 2‚000 promotions and offering savings of up to 20% on its branded products. This follows an earlier move in March‚ when the company cut prices of more than 1‚300 basic items and put more than 1‚000 items on special‚ carrying the cost of R500m.

 

Premier Fishing and Brands’ share price dropped more than 7% on Tuesday‚ despite the company declaring a maiden dividend of 15c for the year to end-August. The group said that profit after tax increased 31% to R52m. Revenue increased 2%‚ offset by an industry-wide decline in the catch of pelagic fish‚ and a stronger rand. Group revenue increased to R411m from R402m in the prior year.

 

Technology group Datatec said on Tuesday it would delist from London’s Alternative Investment Market (AIM)‚ where it has had a secondary listing since 2006. The decision to pull the plug on the London’s AIM was based on poor liquidity. Datatec said 24% of its shareholders were non-South African and invested on the JSE because of good liquidity. Cancellation of the AIM listing will only affect shareholders whose shares are currently held on the Jersey register.

 

Mediclinic International said on Monday it was considering a hostile takeover of its UK associate‚ Spire Healthcare Group. Mediclinic on Monday confirmed a statement Spire issued to its shareholders‚ saying the JSE-listed group had approached it to buy the 70.1% of Spire it did not already own. Mediclinic’s offer of GBP1.50 cash and 0.232 Mediclinic shares/Spire share was rejected by the target company’s independent directors. According to Mediclinic‚ its cash and share offer equates to GBP3/Spire share‚ a 15% premium to London-listed hospital group’s GBP2.61 closing price on Friday.

 

Gold Fields maintained its FY production guidance despite forecasting a 10% drop in output from its sole South African mine‚ South Deep‚ which is ramping up to full production. Gold Fields generated positive cash flow of USD85m for the September quarter after outflows of USD67m in the June quarter. If the chunky USD67m of capital expenditure on projects in Ghana‚ Australia‚ SA and an exploration project in Chile was excluded‚ cash flows would have stood at USD152m. Gold production came in 6% higher at 567‚000oz for the quarter compared with the same period a year earlier. All-in costs for that production fell by 1% y/y to USD1‚032/oz against a received gold price that was 4% lower at USD1‚276/oz.

 

Alternative and renewable energy group Renergen said on Monday it had secured the first and only petroleum production right in SA. Development came after the company received environmental authorisation from Petroleum Agency of SA‚ which oversaw the process that took 2 years to conclude. Subsidiary Tetra4 will now start construction of natural gas liquefiers early in 2018‚ with production of liquefied natural gas to start early in 2019.

 

US fund manager BlackRock said on Monday it was considering making one of its funds‚ the Greater Europe Investment Trust‚ available to JSE investors. The listing is planned for the end of November‚ subject to minimum level of demand. The fund is listed on the LSE with GBP313m assets under management.

 

The share price of financial services group Efficient Group climbed more than 5% on Monday‚ after the company said it expected HEPS to increase by at least 76.9% for the year to end-August. The company said HEPS was expected to be between 73.48c and 79.7c‚ or 76.9% and 91.9% higher‚ due primarily to re-measurement of the forward purchase liability and related impairment of the acquisition of Select Manager Proprietary group of companies.

 

Pioneer Foods’s share price fell 6% to R110.62 on Monday morning after it warned shareholders its earnings for the year to end-September had halved. Pioneer said it expected to report on November 20 that its HEPS would fall to between R3.98 and R4.70 from the previous year’s R9.04. Revenue decreased by between 4% and 6% from the R20.6bn in the comparative period.  

 

Industrial holding company enX’s revenue increased more than fivefold to R6.2bn following its takeover of Eqstra’s industrial equipment and fleet leasing businesses. But its after-tax loss widened more than sixfold to R461m for the year to end-August from R71m the previous year. Along with its results statement on Monday morning‚ enX also announced the resignation of CEO Jannie Serfontein who will be replaced by executive deputy chairman Paul Mansour on March 31.

 

Group Five’s share price rebounded 12% to R12 on Monday from Friday’s 14% crash to R10.70 after it refused to let Greenbay rush it into a R1.6bn sale of its European subsidiaries. On Friday before the deadline Greenbay set when it announced its offer the previous Friday after business hours, Group Five issued a statement saying it decided to let the offer lapse since Greenbay refused to allow reasonable time for an independent expert to assess the proposal. 

 

ECONOMIC NEWS

Producer prices accelerated even faster than expected in September, data from Stats SA showed on Thursday. The PPI for final manufactured goods‚ considered the headline figure‚ rose 5.2% in September compared with a year earlier. That is up from 4.2% in August‚ and compares with a 5% estimate in a poll by Trading Economics and Investec’s forecast for 4.9%. Fuel prices have been a key driver of both producer and consumer inflation in the past couple of months‚ and Investec Bank economist Kamilla Kaplan flagged fuel prices as the main reason PPI inflation was expected to pick up.

 

SA steel producer Scaw Metals on Thursday dismissed an “affirmative preliminary determination” by the US department of commerce that stated the company was involved in dumping carbon and alloy steel wire rod in America‚ along with firms from Italy‚ South Korea‚ Spain‚ Turkey‚ Ukraine‚ and the UK. In the SA investigation‚ the US state assigned a preliminary dumping rate of 142.26% on ArcelorMittal SA‚ Scaw Metals Group and Consolidated Wire Industries‚ based on “adverse facts” due to their stated failure to respond to the department’s request for information.

 

The Chamber of Mines said on Thursday it would not back away from its legal challenge against the Department of Mineral Resources. This was in response to Finance Minister Malusi Gigaba’s call for talks to address the bad-tempered and damaging fight between the department and the chamber about the Mining Charter‚ which goes to court in December.

 

Credit rating agency Fitch said on Thursday that Finance Minister Malusi Gigaba’s medium-term budget pointed to a sharp fall in fiscal revenue “but has no measures to contain the impact on deficits and debt ... This suggests that the change in direction of policy making away from a focus on fiscal consolidation‚ that we anticipated as a consequence of March’s Cabinet reshuffle‚ is under way and occurring faster than we had expected”.

 

Real disposable take-home pay shrank for the first time in 7 months on a y/y basis due to higher inflation in September 2017‚ according to the monthly BankservAfrica Disposable Index released on Thursday. The average‚ real‚ seasonally adjusted banked salary declined by 1.3% to R13‚964 in September. In nominal terms‚ the take-home salary averaged at R14‚255. While these changes do not represent a complete reversal in the trend towards declining take-home pay levels‚ it has become evident that the lower growth rate in nominal and real terms is becoming the norm‚ the report said.

 

SA’s steel production grew by 9.9% y/y in September to 556‚000 tons‚ after surging by 24.4% in August‚ and following July’s 6.3% decline and June’s 15.9% plunge‚ according to the World Steel Association. The 8.2% rise in steel production in Q3  may indicate that GDP growth in H2 of this year could be far higher than the 1.1% increase achieved in the H1 of the year when steel production declined on a year-ago basis. Rebound in steel production is reflected in the fourth consecutive month of y/y increases in new vehicle sales‚ as well as vehicle exports. 

SOURCE: BD PRO

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