News / Industry

Monday 27 November - 01 December 2017 

 

BUSINESS NEWS

Moody’s downgraded Eskom to its third rung of junk on Wednesday‚ matching S&P’s view of the creditworthiness of the state-owned power utility. Moody’s cut Eskom’s credit rating to Ba3 from Ba2‚ with an outlook of “review for further downgrade”. A further downgrade for Eskom would mean falling into the “highly speculative” band from the “non-investment grade” band. Moody’s said that though Eskom had managed to borrow more than half the money it needs for its year to end-March 2018‚ it still needed to borrow a further R24bn.

 

State-owned national airline SAA was projecting a loss of R4bn for the financial year to end-March 2018‚ CFO Phumeza Nhantsi said on Wednesday. This was much worse than the R2.8bn loss projected in the five-year turnaround plan. The loss was mainly due to the costs associated with exiting from leasing five narrow- bodied aircraft. By end-September 2017‚ the loss for the year to date was R2.1bn‚ up from the projected R1.8bn. Revenue came in at R14.5bn‚ lower than the budged R15.4bn.

 

The long-awaited review of the suspended third Mining Charter in the High Court in Pretoria was postponed to February 19 from mid-December at the request of the Chamber of Mines‚ the Department of Mineral Resources said on Monday. The chamber‚ which is seeking the review of the charter Mineral Resources Minister Mosebenzi Zwane introduced in mid-June‚ approached the court on November 24 to request the postponement of the review to February. The chamber said‚ however‚ it had not requested the postponement and that the suggestion had instead come from the full bench of three judges.

 

 

CORPORATE NEWS

UK bank Barclays has reduced its stake in Absa’s JSE-listed parent‚ Barclays Africa Group‚ to 14.9% from 23.4% in June. Barclays Africa Group said on Friday that 1.5% of the shares had been transferred to an empowerment scheme from its former UK parent‚ as agreed in June. Barclays has agreed to sell 7% of its former South African subsidiary to the PIC at R136.09/share‚ a 14% discount to Barclays Africa Group’s R157.78 closing price on Thursday. This transaction still needed regulatory approval.

 

African Bank‚ the “good bank” salvaged from the collapsed Abil group‚ on Friday reported it swung to an after-tax profit of R786m for the year to end-September. In the comparative period‚ which was only the six months from when the bank re-opened on April 4 to end-September‚ it reported a loss of R1.7bn.

 

ETF and unit trust manager Sygnia said on Friday that basic and HEPS for the year to end-September grew between 25.1% to 69.72c. The company declared a dividend of 60c. Revenue grew 20.6% to R333.1m due to the growth of new assets‚ new clients and a strong performance from Sygnia Securities. Total expenses grew 16.1% to R230.4m as the group kept its focus on improved technology platforms.

 

Reinet’s share price increased nearly ninefold to R265 on Wednesday morning from Tuesday’s R30 closing price — which actually left shareholders slightly poorer since the company did a one-for-10 share consolidation. For Reinet’s share to have retained Tuesday’s closing price‚ it would have to reach R300 on Wednesday. The highest it had traded at by 9.20am was R299.

 

Kaap Agri on Wednesday reported an 18% rise in recurring HEPS to R3.52 in the year to September‚ from the same period a year ago. The value of business transacted was up 12.3% to R8.6bn. Income from the trading division‚ which includes the Agrimark retail branches‚ Pakmark packaging material distribution centres‚ mechanisation services‚ spare parts and irrigation operations‚ was up 6.3% y/y. Income from the fuel and convenience division rose 34.2%. Kaap Agri declared a final dividend of 82.60c.

 

Crookes Brothers on Wednesday reported a 70.5% plunge in H1 net profit to R26.4m‚ dragged lower by a decrease in sugar cane revenue and a write down in its “cane biological asset value”‚ as a result of the drought. Sugar cane revenue dropped 9.6% to R240.5m‚ as sugar prices dropped in SA and Zambia and sugar production dropped due to drought. An interim dividend of 35c was declared.

 

Former mining-services specialist eXtract Group said on Wednesday it had secured asset sales of R725m in the 14 months to end-August‚ with a further R441m in sales secured in October. The group said it would utilise cash generated from sales of operational assets to reduce banking debt and provide seed capital to Last Mile Fund (LMF)‚ created by ex-Harmony CEO Bernard Swanepoel and eXtract interim CEO Clinton Halsey.

 

BSI Steel’s share price jumped 47% to 44c on Wednesday after announcing a buy-out offer at 50c/share‚ valuing the company at R360m. The company said its board had decided to de-list the company due to “the costs of remaining listed on the JSE‚ the absence of liquidity in the share‚ the company not expecting to raise equity capital in the near future‚ and the questioned necessity of the listing to support the growth aspirations of the BSI group”.

 

Packing group Nampak on Tuesday reported a 15% rise in FY HEPS to R1.24‚ which was in the upper range of its recent guidance. The metals division was a star performer‚ which more than compensated for the plastics‚ paper and glass units. A relatively stronger rand also affected the translated earnings. Group revenue fell 2% to R18.8bn in the year to September. But group trading profit rose 3% to R2bn.

 

Long4Life’s share price rose as much as 4% to R4.70 on Tuesday after announcing its latest acquisition‚ Stellenbosch-based soft-drink maker Chill Beverages. The deal would see Long4Life paying a minimum of R452m‚ rising to up to R734m if Chill beat agreed earnings targets. Long4Life would pay 75% cash with the remaining 25% in Long4Life shares priced at R5.21 each.

 

Low crop prices prompted farmers to scrimp on fertilizer during the past planting season‚ Omnia said in its interim results statement on Tuesday. The chemical producer’s agricultural division‚ which contributes about half of its revenue‚ suffered an 11% decline in sales to R3.8bn, while operating profit more than doubled to R111m from R52m. The company declared a R2 interim dividend.

 

Specialist financial service company Ecsponent on Tuesday reported a 72.2% rise in HEPS to 1.7c for the six-months to end-September. This was towards the upper end of its recent guidance‚ but with the results lifted by a change in its financial year-end. Total profits after tax increased by 77.4% to R31m during the period‚ compared with R17.5m in the prior period‚ which ran until the end of June.

 

Agricultural group Crookes Brothers said on Tuesday it expected H1 HEPS to drop by up to 84% to about 52.3c. The drop in HEPS is a result of lower sugar prices and a reduction in sugar cane under crop due to drought. The trading update sent the share price down 15% to R56 in late trade on the JSE‚ though the drop in the share price was on thin volumes.

 

Mining group South32 said on Monday it would manage South African Energy Coal as a standalone business from April and would invest R4.3bn to extend the life of its Klipspruit colliery by about 20 years. The company said it was also looking to broaden the ownership of the coal business in SA‚ a development it said presented opportunities for broad-based economic empowerment entities‚ employees and communities. CEO Graham Kerr said SA Energy Coal could also list on the JSE.

 

Strikes‚ a shrinking market and aggressive competition in the snacks and treats sector were among the reasons Tiger Brands gave on Monday for flat sales and lower profits for its 2017 financial year. The group reported that revenue grew 2.3% to R31.3bn, while net profit declined 5.5% to R3bn during the year to end-September. Tiger Brands maintained its final dividend level at R7.02.

 

Vukile Property Fund reported on Monday it increased its dividend by 7.4% to 72.6535c/share for the six months to end-September. The group concluded its Spanish acquisitions during the period. The transaction was worth EUR193m. It also increased its stake in Atlantic Leaf‚ acquiring a further 23.2m shares for R407.5m. Net profit from property operations decreased by R102.3m compared with the year-earlier period‚ from R705.2m to R602.9m‚ partly due to the Spanish transaction. 

 

Investment holding group Invicta on Monday reported a 7% drop in H1 HEPS to R2.25‚ which it said reflected the true economic reality in SA‚ where it generates 80% of its revenue. Group net profit was up 6% to R314m‚ assisted by profits made on the sale of Building Supplies Group.

 

Sirius Real Estate said on Monday it had increased its dividend per share to 1.56c from 1.39c for the six-months to end-September‚ having temporarily upped its payout ratio of funds from operations from 65% to 75%. Funds from operations grew 8.2% to EUR18.5m during the period. Profit before tax in the period grew 44.5% y/y to EUR54.7m‚ with like-for-like annualised income increasing 2% to EUR65.2m. Adjusted net value per share increased by 7.8% to 63.4c from 58.82c.

 

Shares of Coal of Africa (CoAL)‚ now known as MC Mining‚ were temporarily suspended on the JSE on Monday‚ with trading resuming on Tuesday. The suspension followed divergent treatment of changes to CoAL’s international securities identification number‚ arising from a proposed share consolidation and name changes. London-listed CoAL was to be suspended on the London Stock Exchange on Tuesday until Wednesday.

 

Diamond producer De Beers put its Voorspoed mine in the Free State up for sale after talking about closing its second-last operation in SA. De Beers‚ which is 85% owned by Anglo American and is the world’s largest diamond producer by value‚ said it was looking for buyers of the opencast mine near Kroonstad. De Beers has the Venetia mine in Limpopo where it is spending $2bn developing an underground mine at its open pit operation. 

 

ECONOMIC NEWS

The contraction of SA’s manufacturing sector slowed slightly in November‚ judging from the Absa purchasing managers index (PMI). The seasonally adjusted PMI rose to 48.6 index points in November 2017 from 47.8 index points in October. Absa said on Friday: “This was the fourth consecutive increase and brought the index to the best level since May 2017. However‚ the PMI remained stuck below the neutral 50-point mark for a sixth straight month‚ suggesting that the sector still faces headwinds."

 

Producer price inflation moderated slightly in October‚ as expected‚ after accelerating faster than expected in September. PPI rose 5% in October from a year earlier. That compares with a 5.2% increase in September. The main contributor to the annual rate was coke‚ petroleum‚ chemical‚ rubber and plastic products‚ which contributed 2.4 percentage points. Prices in that category were up 11.2% from a year earlier. The PPI for food products rose 0.4% from a year earlier.

 

SA recorded a trade surplus of R4.56bn in October 2017 compared with a deficit recorded of R3.21bn in the same period a year ago, the South African Revenue Service (SARS) reported on Thursday. The Bloomberg consensus forecast was for a deficit of R5.5bn – this would have been the first time in 2017 that the trade account slipped into the red. The October surplus was attributable to exports of R104.51bn and imports of R99.95bn. The exports were 17.7% higher than the R88.83Bn recorded in October 2016‚ while imports were up 8.6% from the R92.04bn previously.

 

Confidence plummeted from 44 points in the Q3 to 34 in the Q4 of 2017, according to the RMB/BER Business Confidence Index (BCI). But this was still higher than in the Q2 when business confidence hit a seven-and-a-half-year low. Despite the slight improvement‚ RMB chief economist Ettienne le Roux said sentiment remained depressed.  Importantly‚ the index was finalised ahead of S&P’s decision to downgrade SA’s local currency credit rating to junk on Friday night.

SOURCE: BDPro

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