| Tuesday 26 April 2022 Good morning Voornaam,
There was murder on the JSE dancefloor yesterday. The resources index fell 5.9% on a truly horrible day for commodities. Anglo fell 7%, which means the mining giant has shed 15% of its value in the past 30 days! Ouch. The rest of the market also burned brightly red, contrasted by some particularly odd positive moves like a 3.5% rally in Capitec. I'm afraid I can't explain that one.
Another move I can't explain is a 9% drop in the price of palladium. Gold fell nearly 2% (an eternal disappointment for me as a "safe haven" asset). The only good news I can report (for consumers at least) is that brent crude fell around 5% and is nearly below $100 again.
As a further note on Anglo, the company announced that the Environmental Assessment Service of Chile has recommended that the application to extend the life of mine at the Lo s Bronces Integrated Project (a large copper mine) be rejected. The recommendation is based on concerns about potential risks to public health, which Anglo believes are unfounded based on the science supporting the project. Anglo continues to work with Chilean authorities to demonstrate that potential impacts have been mitigated and to secure approval.
Sasol released its production and sales metrics for the nine months ended March 2022. The heavy rainfall and flooding in KZN happened after this period and have caused some major challenges, including a force majeure declaration on the export of certain chemical products. The volume outlook for Q4'22 could be impacted, depending on the extent of infrastructure damage. In the three months since the last update, Sasol has at least made progress on the issues in the Mining and Secunda Operations, with the coal stockpile on track and improved availability of feedstock. The Mining business reported a 7% quar ter-on-quarter gain in productivity.
The Foschini Group (TFG) has released a trading statement for the twelve months to 31 March 2022, including an update on the situation from the floods in KZN. The numbers look good, with HEPS expected to be over 100% higher than in the prior period result of 197.9 cents. A closer read unveils a weird situation where the announcement guides that earnings will be "more than 692.6 cents per share higher" which is a lot more than 100% higher! In the floods, 36 stores and a "cloth" warehouse were damaged, but the company says the damages aren't material. It made me smile to see an unintended dad joke on SENS.
Astral Foods was one of the few green counters on the local market thanks to an updated trading statement with higher earnings guidance. For the six months to March 2022, HEPS is expected to increase by between 130% and 140%. The company does point out that this result is measured ag ainst a low base in which the company couldn't recover significant increases in feed costs due to Covid-related pressures. In this period, both volumes and margins are up. The improved margins were achieved by efficiency gains and partial recovery of input cost pressures like feed and energy.
Royal Bafokeng Platinum released a quarterly review and production report for the three months ended March 2022. In addition to the great news of zero fatalities, the company achieved solid growth in volumes like a 7.5% increase in 4E metals in concentrate. Costs grew significantly though, with a 21.7% increase in cash operating costs attributed to higher production and industry-related inflation. The unit cash cost per 4E ounce increased by 13.2%, so that gives an indication of inflationary pressures. Total capital expenditure for the quarter was up 4.2%. As at 31 March 2022, the company was in a net cash position of R6.5 billion, up from R4.9 billion at the end of December. The R6.5 billion was before the final dividend payment of R1.5 billion to shareholders.
CSG Holdings will delist from the JSE on 26th April. The offer by ARC Fund was accepted by holders of 23.1% of total shares in issue, taking ARC's stake in the company to 47.9%. It's interesting to see a company go private without the offeror holding a majority stake.
In today's feature articles, I look at Standard Bank's encouraging quarterly update and PSG's double-whammy of a results announcement and a formal proposal for the unbundling and delisting. The re's a lot to learn from both articles.
In the latest Magic Markets podcast, Petri Redelinghuys from Herenya Capital Advisors joined us to chat energy, ETFs and ethical dilemmas in investing. Don't miss this great show!
Finally, Itumeleng Ndlozi from Ince has weighed in on the concept of trust in the public sector. It's a great read that deals with one of the most important challenges facing our country.
Have a great Tuesday!
The Finance Ghost
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