Northam Platinum buys Eland mine from Glencore

By Allan Seccombe

Northam Platinum’s strategy of buying additional mines‚ as its strives to become a 1-million ounce a year platinum group metals producer‚ netted it Glencore’s Eland Platinum mine for R175m cash.

As part of the agreement‚ Glencore will have exclusive rights to market and sell all the chrome Northam produces in exchange for the sale of its Eland mine and a concentrator that can treat 250‚000 tonnes of ore a month.

It also comes with a 100-piece mining fleet‚ some of which Northam will divert to its new Booysendal South mine‚ which was the old Everest South mine it bought from Aquarius Platinum to unlock its large Booysendal tenement near Steelpoort in Limpopo.

The Booysendal mine increased its chrome concentrate output by 45% in the six months to end-December‚ to 138‚635 tonnes.

Eland has a resource of 21.3-million ounces of four platinum group metals near Brits in the North West.

“The Eland transaction provides Northam with a medium-term option over a large‚ shallow resource with fully developed‚ world-class surface infrastructure‚” Northam CEO Paul Dunne said.

Northam reported a narrowing of its loss for the six months to end-December‚ at R226.6m against a R273m loss in the same period a year earlier.

The loss comes despite an uptick in revenue to R3.5bn from R3.2bn and operating profit growing to R352m from R93m.

Metal sales fell nearly 10% to 223‚705oz during the interim period because of an 18-day stoppage caused by a mill failure at its UG2 concentrator at its Zondereinde mine. UG2 is a reef that contains platinum group metals and chrome and is one of two reefs that platinum miners target‚ the other being the sought-after Merensky Reef.

Northam also rearranged its underground working crews after it fired 357 people following labour disruptions at the mine in June last year‚ which meant fewer tonnes of UG2 and Merensky ore were mined and hoisted.

Northam expects to have full mining teams back underground by March.

Booysendal generated 100‚021oz of platinum group metals‚ up from nearly 74‚000oz a year earlier.

Source:BDproDate: 2017/02/24

Liberty feels the pain of constrained consumers

By Hanna Ziady

A challenging consumer environment‚ lower investment returns and a decline in earnings from Stanlib were the main drivers behind Liberty’s 38.8% slide in normalised headline earnings for the year to end-December 2016.

Normalised headline earnings of R2.5bn‚ represented a 37% drop in operating earnings on the previous comparable period and a 42% decline in earnings from the shareholder investment portfolio‚ which was hit by weak equity markets‚ Liberty said.

Headline earnings from the group’s South African retail operations of R1.1bn were 40% behind the year-earlier period.

The high value of policy surrenders and maturities drove net customer cash inflows in that business 70% lower to R1.9bn. These were attributable to the challenging consumer environment‚ Liberty said.

In its corporate business‚ earnings fell 13% to R191m. Net cash outflows of R751m (2015: R891m) reflected low single premium new business and high risk claims linked to the challenging economic environment and associated job losses‚ Liberty said.

Asset manager Stanlib’s headline earnings of R362m were 42% lower than the previous year.

“Continued low market returns and positive but lower external net cash inflows‚ higher once-off costs relating to the implementation of the outsourcing of its retail and institutional administration business and costs relating to provisioning for tax and client exposures contributed to this result‚” Liberty said.

Stanlib’s net customer cash inflows amounted to R5.8bn (2015: R8.5bn)‚ due mainly to South African nonmoney market flows‚ while total assets under management increased 1% to R586bn.

Across the group‚ net customer cash inflows amounted to R7.7bn (2015: R15.2bn)‚ within which long-term insurance net customer cash inflows amounted to R1.1bn (2015: R5.4bn).

“Management has taken active steps to address some of the shorter-term challenges and made a number of executive management changes to improve the execution of the group’s strategy and to ensure that key initiatives are prioritised‚” Liberty said in its earnings statement.

“Management’s immediate priorities are to address shorter-term challenges relating to sales‚ the ongoing competitiveness of Liberty’s product suite and ongoing cost management‚” it said.

Liberty declared a final dividend of 415c a share‚ 5% lower than the previous period.

Source:BDproDate: 2017/02/24

Edcon Not out of the woods yet

Edcon CEO Bernie Brookes seems unfazed by the less-than-lukewarm response to the group’s recently announced board.

“It’s fine; we’ll prove ourselves over time,” he says phlegmatically to reports that analysts have been unimpressed by the seven-person board.

Right now winning an analysts’ popularity contest is the least of the challenges facing Brookes and his new board.

With three years to go before any listing (on the more optimistic projections) it is certainly less important than getting approval from the group’s remaining 45,000 employees.

Brookes says he’s hoping to get the staff turnover rate down to below 30% and closer to the industry average.

While most employees are presumably hugely relieved that Edcon dodged the business rescue bullet, these corporate survivors must be feeling a little frazzled after 10 years in a private equity cauldron.

Of course, thousands didn’t make it; they were culled in one of Bain Capital’s cost-cutting exercises effected in a desperate bid to recoup part of the ill-considered R25bn buyout amount paid in 2007 just months before $the global crisis hit.

Management was faced with unrealistic targets that had been used to justify the price tag at a time when economic activity was hollowed out by the financial crisis.

The scene was set for a torrid time for all concerned, made all the worse by the bondholders’ determination to seek the solution in international executive talent. Inevitably, during the following years many of the best of Edcon’s local managers headed off in search of a less fraught work environment.

Ten years later, while there’s relief that the bondholders accepted the restructuring plan, there are rumblings of dissatisfaction that the top executive team is still dominated by nonSouth Africans, this time Australians.

It’s not unreasonable.

It would be easy to argue that the severity of Edcon’s problems has been aggravated by a poor understanding of local market conditions.

During the six years to end-2015 Edcon employees watched as (largely foreign) executive management lurched from one ill-considered strategic misstep to another and their once great company haemorrhaged from its position of having a dominant 32% market share.

Bain Capital not only constantly interfered with top management, but for a long period allowed McKinsey consultants to take up nearpermanent residence in Edgardale.

“McKinsey actually did some good research, it was just never used,” recalls one executive.

While having an international perspective on retail is always useful, during Jürgen Schreiber’s reign it went to extremes. So many of the top executives were German that executive committee meetings were held in the German language. Inevitably the locals felt out of place and demotivated.

Before Schreiber even started, Frenchman Hugues Witvoet managed to wreak untold damage as CEO of Edgars, until Bain Capital became suspicious of his CV claims.

And it certainly didn’t help that these high-paid international executives were pouring in at a time of sustained cost-cutting across the group.

Brookes seems sensitive to concerns about the continued dominance of non-South Africans, but points out that four of his eight top executives are local; three are Australian (not by birth) and another German.

The profile of the board, which was announced last week, is dramatically different from the old one. It was previously dominated by bankers and foreign bondholders, but the new members come fromvaried backgrounds, some even with a bit of retail experience, and most are South African.

“Five of the seven are South Africans, and the other two bring a useful international perspective,” says the new chairman, former De Beers CEO Gareth Penny.

Edcon has been through too much and was too close to the brink for anyone to now assume it is confidently on the road to recovery.

There are some who say Brookes hasn’t much to show for the 17 months he’s been there. Industry analyst Syd Vianello isn’t one of them; he says Brookes’s contribution was critical to the staving off of business rescue.

“He has had to spend the past 12 months sorting out Edcon’s financial mess. He’s only just begun the turnaround, so it’s going to be at least another two years before we see much,” says Vianello, who’s a little more excited about the new board than most.

Ironically, Brookes comes from a company that was targeted years ago by a robust Edcon. Flush with huge cash profits and global ambitions, the top Edcon executive team looked at taking over the troubled iconic Australian department store Myer back in 2006.

But the Edcon board was nervous about loading the company up with debt and would back only a paltry offer, so instead, Myer was bought out by private equity firm TPG, which brought in Brookes to sort out the problems.

Australian analyst Chris Wilkinson of First Retail Group describes Brookes as a seasoned retailer who led the Myer chain through testing times for the department store sector.

“At the time Myer and competitor David Jones were both struggling under changes in consumer demand, increased competition from brands and specialist chains, legacy commitments and store portfolios that no longer fitted a contemporary retail model,” says Wilkinson.

(And just to prove how small the world of retail is, in 2013, when both Myer and David Jones were again struggling, the Myer board proposed a nil-premium merger of equals. That deal was scuppered by an aggressive bid from Woolworths, which was prepared to pay a 25% premium for David Jones.)

Wilkinson, who sees the similarities between the SA and Australian markets, warns that the changes facing Edcon won’t be easy on anyone.

“Changes he put in place (at Myer) upset many people inside and outside the company. But Brookes is a true retailer; there’s a lot of skill as well as an old-fashioned gut feel that’s helped him.”

It’s a perspective not everyone agrees with. A second Australia-based analyst says Brookes may have been a good retailer but that he rather inexplicably took his eye off the Myer ball to “hit the speaking circuit big time”. When Myer started to flounder Brookes’ response was ineffectual, he says.

Brookes sees Edcon as an opportunity to put some of his Australian ghosts to rest and retire on an upbeat note. And 45,000 employees will be hoping he pulls it off; but it’s still far from a certainty.

Source:Financial MailDate: 2017/02/24

Spur aims to grow thriving eateries

Restaurant franchisor Spur Corporation is relishing the opportunity to expand its recently acquired gourmet burger business RocoMamas and upmarket steakhouse Hussar Grill.

The company’s results for the six months to end-December released on Thursday showed fast-growing RocoMamas, now a 48-strong restaurant chain, managed to more than double turnover to R232.5m.

The Hussar Grill, which opened three new restaurants in the interim period, saw revenue up 58% to R73m.

In a presentation to shareholders, Spur CEO Pierre van Tonder said RocoMamas benefited from three menu price increases — 1.7% in the first half of 2016, 3.3% in the second half of 2016 and 2.3% more in November 2016.

He said RocoMamas’s “edgy brand” appealed to millennials, noting huge customer and franchisee interest. Another two RocoMamas restaurants have been opened after the close of the interim period, bringing the store numbers to 50.

Van Tonder said the Hussar Grill’s performance underlined the resilience of the brand’s higher-income customer base.

At franchise level, RocoMamas generated 50% more in top line at R11.9m, with operating profit coming in 62% higher at R8.2m. The operating margin was 70.4%. At franchise level the Hussar Grill pushed up operating income by 174% to R2.3m on a 67% operating margin.

Captain DoRegos reported a sales decline of 15.8% with another five outlets that were underperforming closed in the interim period.

Van Tonder said Spur management were committed to the brand and were reviewing the business model in order to improve profitability.

represents turnover doubling for fast-growing 48-strong chain

Source:Business DayDate: 2017/02/24

Restructuring helps Afrox grow annual profit and earnings

A much leaner Afrox saw the positive results of its 2015 restructuring in the year ended December 2016, while continuing to battle headwinds in the South African economy.

The group has pared down staff numbers through retrenchments and natural attrition since 2015 from about 3,000 employees to 2,000 now. This has freed up cash at the same time that operating efficiencies have been improved. Revenue only crept up 1% to R5.5bn in the year, but profit in the period shot up 41% to R600m from R425m previously. Headline earnings per share soared 36%.

“The turnaround has been completed and has delivered a step-change in profitability,” MD Schalk Venter said on Thursday.

Afrox said it had increased earnings before interest, tax, depreciation and amortisation by 23% to R1.24bn, despite a challenging economic environment and past shortages of supplies of carbon dioxide used in drinks manufacture and liquefied petroleum gas (LPG).

The group ascribed this to the benefits of the restructuring and also a legacy legal settlement with ArcelorMittal SA that saw R165m injected into the group.

The continued focus on inventory management and optimisation of fixed assets helped provide cash on hand of R153m from a position of R148m in net borrowings in 2015.

Return on capital employed rose 24.6% from 16.7% in 2015.

Meanwhile, capital expenditure of R379m was constant year on year, ensuring sufficient production capacity to meet expected medium-term demand, Afrox said.

The rest of Africa excluding SA now accounted for 14% of revenues. Financial director Dorian Devers said cross-border African margins were higher, reflecting higher levels of risk on the rest of the continent.

Emerging Africa revenue remained flat at R755m in the year. Product volumes held up relatively well due to the group’s exposure to consumer-led markets. But gross profit after distribution expenses fell 1.6% to R306m in the period. The fall was prompted by supply chain shortages of imports of carbon dioxide and LPG from SA.

This resulted in alternative and more expensive sourcing in order to maintain supply levels. Afrox said. In addition, both revenue and profits were negatively affected by currency depreciation in most countries in Africa.

The group had also started small-scale exports of products into Latin American agro-processing markets.

Source:Business DayDate: 2017/02/24

Glencore profit drive

Diversified mining and marketing group Glencore would generate significant cash in the next few years that will be distributed as ordinary and special dividends if there were no other compelling growth or acquisition opportunities, CEO Ivan Glasenberg said on Thursday.

Mining producers are starting to resume dividends after a marked recovery in the prices of bulk commodities in the second half of 2016, with the exception of Anglo American, which said on Tuesday it would resume dividends at the end of 2017.

Glencore has declared a dividend of 7 US cents per share for its 2016 financial year that will be paid in two parts, in the first and second half of 2017.

The dividend reflected a 17% increase in funds from operations to $7.8bn, a 40% reduction in net debt to $15.5bn aided by disposals, cost cuts as well as expectations that capital spending in future will be far lower than it has been in the past five years.

The results exceeded most analysts’ forecasts. Glencore’s shares added 2.6% to R54.54 after the results were released. They are trading at their highest level in about 21 months.

SP Angel analyst John Meyer said Glencore had significantly turned around the company’s debt position through a combination of asset disposals and rigorous cost control at the continuing operations.

A negative feature of the past year’s performance was that 16 people had been killed in accidents across Glencore’s global operations. Ten people died in two incidents in the Democratic Republic of Congo and Zambia and six people died elsewhere.

Asked whether Glencore would increase automation to improve its safety performance, Glasenberg said its operations were as automated as they could be and that was not the solution. The solution lay in changing the culture of the workforce in the DRC and Zambia, which had been done successfully in SA and Kazakhstan.

Glencore has leading positions in global seaborne thermal coal, zinc, copper, cobalt, lead and ferrochrome.

Demand for commodities had remained solid for several years, Glasenberg said, but prices were weighed down until early 2016 by oversupply as global miners built large new mines and expansions.

In the past three years Glencore cut back production of copper, zinc and coal, which helped to underpin prices, especially for zinc.

The spot price of zinc has climbed to $2,860 a tonne from 1,470 in January 2016.

Global supply of copper has also reduced as a result of technical and labour issues at some of the world’s biggest mines.

Coal supply fell as China reduced its working week.

Glasenberg said the group’s capex budget for the next three to five years was about $4bn a year, of which $3bn would stay in business capex and only $1bn be allotted for projects.

Capex peaked in 2012 at about $13bn.

Investments at Glencore’s Katanga and Mopani copper operations were almost complete and these projects would start to come on stream in 2018 and 2019.

The group had other brownfields expansion opportunities but it would be cautious about bringing more production into the market, Glasenberg said.

It would not bring back the 500,000 tonnes a year of zinc production it had mothballed unless there was sufficient demand for it.

is the increase in funds from operations, as reflected in the dividend


people were killed in accidents across Glencore’s global operations

Source:Business DayDate: 2017/02/24

'Relief rally' boosts Discovery

Investors rushed to buy Discovery shares on Thursday, relieved that no imminent rights issue would dilute their stock and encouraged by the group’s emerging businesses, which finally looked near profitable.

Shares in Discovery rose as much as 7.92% to R127.99, despite the group missing earnings forecasts. The share price closed 4.35% higher at R124.70.

The share-price jump was partly a “relief rally”, with shareholders pleased that no rights issue was announced to raise capital for new business funding, said analysts.

Delivering the group’s results for the six months to December 2016, CEO Adrian Gore said the group had more than R1bn to fund new business growth.

Spend on new initiatives fell 36% to R244m, accounting for 7% of operating profit, which rose 13% to R3.4bn.

The share was further buoyed by news that operating losses in emerging businesses — Ping An Health, Discovery Insure and the Vitality Group — were substantially lower.

“We hope these businesses will be profitable in the next six months,” Gore said.

Discovery Insure would offer commercial insurance to small and medium-sized businesses, said CEO Anton Ossip. As with Discovery’s other businesses, the product would reward positive behaviour for sound risk management, he said.

Ping An Health posted an operating loss of R9m — an 88% improvement on the previous period. Profitability would depend on the quantum of growth and associated new business strain, Gore said.

“The Ping An Group’s intention is to build a considerable health business.” Ping An Health has about 1-million clients.

China’s private health insurance market was expected to be a 1-trillion yuan (145bn) industry by 2020, Gore said.

“Ping An Health, Discovery Insure and Vitality Group all look like they will turn the corner to profitability over the next few years…. These assets all have substantial potential in our estimation, particularly Ping An Health,” said Justin Floor, portfolio manager at Kagiso Asset Management.

Discovery would launch an umbrella fund in its Invest unit and expand into the UK investment market, said Gore.

It expected to launch its bank in 2018.

“Discovery’s impressive growth ambitions are cashhungry and I would expect ongoing scrutiny around the balance sheet, which is looking increasingly stretched,” commented Floor.

The groups’ embedded value was flat at R53.3bn, hurt by record low interest rates in the UK and the effect of the stronger rand on offshore earnings.

Low UK interest rates were the biggest risk facing the group, Gore said. If rates increased, Vitality UK would be significantly more profitable, he said.

Source:Business DayDate: 2017/02/24

Barclays Africa wins R12.8bn fee

Barclays plc has pleasantly surprised the market by agreeing to pay a R12.8bn “divorce settlement” to subsidiary Barclays Africa, in which it is selling down its majority interest.

The payout is expected to significantly reduce the financial pressure on the African subsidiary caused by the separation.

Barclays Africa CEO Maria Ramos plans to spend some of the proceeds from the “divorce settlement” on rebranding the group and investing in its operations outside SA.

The two groups have agreed on a £765m (R12.8bn) separation fee to be paid by Barclays plc to allow Barclays Africa to cover the costs of investing in technology, rebranding, the termination of service level agreements between the two companies, and other separation expenses.

The largest share of the amount, R8.6bn, is set aside for technology, rebranding and related projects. “The agreement now is we have three years to change the brand,” Ramos said after the release of the group’s results for the year to December 2016. “We have to change the brand from Barclays.”

While the group’s retail bank in SA bears the red Absa logo, its other operations have borne Barclays plc’s blue logo for more than 100 years, even after the former Absa group took over the British banker’s African franchise and renamed it Barclays Africa in 2013.

Ramos does not yet know what the new name will be, but said the three-year grace period was granted so the group could proceed carefully with its rebranding. “The brand is very well established…. That is why we have to do [the rebranding] with care. We will ensure that customers will continue to get the same levels of service.

“It is important to note that they get this service from Barclays Africa and have done so for the past few years.”

Adrian Cloete, portfolio manager at PSG Wealth, said Barclays plc’s decision to pay the separation costs was a “positive surprise”.

“[It] does reduce most of the concerns around the financial impacts on Barclays Africa from the separation process,” he said.

“Barclays Africa expects that the financial contributions will neutralise the capital and cash- flow impacts of separation on the group over time. This is good news on a net basis, as the market was concerned about the financial impact from [the] separation and now Barclays Africa is receiving quite a large financial remedy for this.”

Jaap Meijer, head of equity research at Arqaam Capital, expected an overhang over the company’s shares as the shadow of Barclays’ sell-down of its 50.1%, to under 20%, loomed over the group. “The unwinding of [Barclays] plc is not helping growth so far, while potentially increasing costs.”

The African banking group saw its return on equity decline to 16.6% from 17% as higher bad debts, which rose 26% to R8.7bn, hit earnings.

Ramos said credit losses had occurred, mainly in retail banking, with corporate and investment banking seeing credit losses driven by singlename provisions for bad debts. Credit extensions inched up 2% to R720bn. “I think the weaker economic environment is reflected across the board in the retail space,” Ramos said.

“What we saw was a slowdown in loans and advances.”

Reserve Bank data show the banking sector’s credit extensions grew 5.59% in the year to December 2016, compared with 8.93% the year before.

Headline earnings rose 5% to R14.9bn, or 1,769c per share.

“Barclays Africa produced a solid set of results considering the very weak economic backdrop in SA during the [financial year],” Cloete said. “The headline earnings increased by 4.9% … which was very marginally below the consensus expectations of 6% and slightly below the [first half] increase of 7.4%.”

Source:Business DayDate: 2017/02/24

Evander faces job cuts or closure

Pan African Resources has told its workforce at the Evander gold mine that the operation was under severe financial stress and could be shut if it did not cut jobs. It warned that 2,000 jobs were at risk if the mine closed.

In a section 189 notice issued in terms of the Labour Relations Act, Pan African said the mine had made losses for seven months and faced a two-month shutdown to refurbish its two shafts at a cost of R40m and the loss of R240m in revenue from halting gold production. It would spend another R60m thereafter at the mine and spend R50m a month on wages.

Pan African said the closure of the mine, coupled with the losses, meant “the mine is now financially unsustainable”.

“Consequently, unless the mine’s operating costs are materially reduced and the sustainability of its infrastructure is substantially enhanced … the mine will need to be placed on indefinite care and maintenance,” the company said.

Of the 2,435 employees at the mine, Pan African warned that the total underground workforce and some support services totalling 2,000 people could be affected if the mine was placed on care and maintenance. It did not indicate how many employees it needed to retrench.

The number of jobs at risk if Evander cannot become sustainable and is placed on care and maintenance

Source:Business DayDate: 2017/02/24

Distell eyes acquisitions

Acquisitions are key to fortifying growth prospects and duty-free access to China could be a game changer for the local wine market, liquor conglomerate Distell has indicated.

Boasting Remgro and the Public Investment Corporation (PIC) as major shareholders, Distell has a presence in the wine, cider, spirits and readyto-drink market. Its best- known brands are Savanna, Hunters Dry, Bernini, Nederburg, Durbanville Hills, 4th Street, JC Le Roux, Klipdrift, Viceroy, Amarula, Bisquit and Scottish Leader.

At an investment presentation covering the interim results to end-December on Thursday, CEO Richard Rushton noted that acquisitions were crucial to enhance existing markets and unlock new markets.

“There is a strong pipeline with interesting potential for diversification and step change. But we will be responsible in terms of what we are willing to pay for acquisitions.”

Opportune Investments CEO Chris Logan argued that duty- free access to China could be a great opportunity to market Distell’s wine.

Australia-based Treasury Wines was earning a 36% ebit (earnings before interest and tax) margin in China – facilitated by duty-free access into that country, he said.

South African wine producers were disadvantaged by the ad valorem tax on South African wines brought into China, Rushton said. But he conceded there would be a lot of opportunity to market premium local African wines. “Duty-free access to China would be a game changer for SA’s wine industry.”

Distell already has a foothold in China via a joint venture company which has been marketing Savanna cider since last December. Plans are to introduce ready-to-drink brand Bernini from April, while Distell plans to break ground on local production shortly.

Distell’s interim numbers showed the effects of tough consumer conditions and added competition. Revenue was up only 2.4% to R12.5bn on a sales volume decline of 3.1%. This is the first time since 2004 that Distell has reported a volume decline. Cider, Distell’s reliable profit spinner for more than two decades, was affected by trade down as disposable incomes come under pressure in SA.

Rushton also noted intensified competition from beer pricing as well as recent readyto-drink launches. Beer giant Heineken relaunched Strongbow cider into SA recently.

“We will defend our cider position in SA with innovation and investments.”

Looking ahead, Rushton said Distell was evaluating its operating model in a bid to reduce costs and enhance efficiencies as the company chased growth domestically and in selected global markets. “We will invest more resources in fewer brands and play to our strengths.

“We will also increase efficiency by building fewer brands in validated priority markets.”

Source:Business DayDate: 2017/02/24

Massmart surges ahead

tronger-than-expected fullyear earnings in the 12 months to end December 2016 saw the Massmart share price surge 10.28% on Thursday to close at a six-month high of R145.25.

Head-office cost-cutting and improved merchandising helped to counter the bottomline effect of muted South African consumer demand and the relatively strong rand, which dulled profit contribution from outside SA. Diluted headline earnings were up 13% to 630.9c per share.

Total sales were up 7.7% on the year to R91.3bn. Product inflation of 6.7% and an increase in stores meant like-for-like sales declined in real terms.

Trading profit, excluding foreign exchange movements and interest, rose 12% to R26bn.

In SA, food and liquor sales grew 11.7%, while general sales increased by only 1.5%.

“Very low discretionary spending by consumers” continued to affect general merchandise, the management said.

In the rest of Africa, where slightly more than 50% of the group’s sales are general merchandise and home improvement, total sales increased by 3.1% on a like-for-like basis in rand terms. In local currency terms, sales growth in Nigeria and Mozambique were strong.

Just under 10% of sales are generated outside SA. CEO Guy Hayward said over the next two years the group’s African footprint would be increased by 25%. “We’re hoping to add five stores a year, with each store contributing R200m a year.”

The biggest overall improvement came from Massdiscounters, which is Game and DionWired. The division reported a 55% trading profit surge to R364.3m on the back of a 5.3% increase in sales to R20.5bn.

Given the underlying product inflation was 4.8% the real increase in sales was 1.5%.

Profit surged as the management had put more of the right merchandise into Game stores and had tightened up on in-store and supply chain costs.

The introduction of a new SAP point-of-sales system towards the end of financial 2017 should help to sustain the margin improvement during the current financial year.

Sasfin analyst Alec Abraham said the results were better than he had expected. The investment in information technology and the implementation of the SAP system had generated strong returns for other retailers and should also help Massmart.

Masswarehouse, the largest division in terms of sales and profit, had a disappointing year with an 11% sales increase to R26.3bn and a 4.4% advance in trading profit to R1.2bn.

Massbuild’s sales were up 5.6% to R12.7bn and trading profit was up 2.7% to R712.6m.

Good cost control at Masscash converted a 7.5% sales increase (to R31.7bn ) into a 28% trading profit hike (to R284.7m).

Company Comment: page 21


Source:Business DayDate: 2017/02/24

Dumping of chicken hit group's performance, says RCL Foods CEO

RCL Foods saw earnings before interest, tax, depreciation and amortisation (ebitda) plunge 21.9% for the six months ended December 2016, with the related margin falling 2% to 6.9%.

Headline earnings per share plummeted 44.8% in the period.

“The single biggest impact on financial performance has been chicken [dumping],” CEO Miles Dally said on Thursday.

The group had laid off 1,355 workers — or half the workforce — at its large Hammarsdale operations in KwaZulu-Natal.

Dally said it was well known that the dumping of chicken products was taking place in South African markets.

This had mostly been blamed on the EU and had caused the government to implement a 13.9% safeguard duty that the industry considered to be substantially inadequate.

The group had initiated a number of strategies to ensure its remaining chicken operations would be more profitable and sustainable in future. This included reducing volumes.

Meanwhile, producers and workers were engaged in a series of talks with the government over what had been dubbed a “crisis in the industry”.

The company’s earnings before ebitda, excluding the chicken business, were up 8.4% to R974m, with a margin of 11% — up from a margin of 10.3% in the period in 2015.

This was largely due to a recovery in sugar profits and progress made in turning around the group’s bakeries in Gauteng.

However, the company had to impair R142m of plant and equipment related to the decision to reduce commodity chicken volumes.

RCL Foods also had to recognise a R52m provision for restructuring costs and fair value adjustments on biological assets associated with the reduction in chicken volumes.

Source:Business DayDate: 2017/02/24

Sibanye Gold returns R1.3bn to shareholders as platinum swells profit

By Allan Seccombe

Sibanye Gold‚ which has become a major platinum producer‚ reported a steep increase in annual profit and paid a handsome dividend as higher gold prices and the inclusion of platinum profits buoyed the company’s results.

Sibanye‚ which during 2016 added the whole of Aquarius Platinum and Anglo American Platinum’s Rustenburg mines to its portfolio‚ declared a total dividend of R1.45 per share for the year‚ returning R1.3bn to shareholders.

It declared a second-half dividend of 60c per share‚ equating to R560m‚ compared with a 90c final dividend the year before.

Sibanye reported a profit for the year to end-December of R3.3bn compared with R538m a year earlier.

Net debt in the group grew to R6.3bn from R1.3bn a year earlier as its gross debt shot up to R8bn from R1.8bn a year earlier‚ as a result of its aggressive growth in platinum.

The two standout weak performances in the year were the Cooke gold mines‚ which recorded a loss of R2bn‚ and the Rustenburg mines‚ which had a R649m loss for the two months — November and December — that Sibanye owned them.

The operating cost at the Rustenburg mines averaged R11‚485/oz of the four platinum group metals the mine produced during the two months and was “unsustainable and highlights the necessity and importance of realising the operating and cost synergies” that Sibanye wants to extract from combining the assets with those of Rustenburg.

Sibanye is undergoing a job-cutting process and restructuring of the assets.

Overall‚ the group had a record operating profit of R10.5bn‚ and headline earnings grew 269% to R2.5bn.

“The gold division benefited from a relatively high rand gold price for most of the year. Unfortunately margins towards the end of the year have shrunk considerably due to a substantially lower rand gold price‚” Sibanye CEO Neal Froneman said.

Sibanye realised R586‚319/kg for its gold sales during the year compared with R475‚508/kg the year before.

All-in sustaining costs grew to R450‚152/kg from R422‚472/kg the year before.

Gold production dipped slightly to 1.51-million ounces from 1.54-million ounces.

Sibanye closed its underperforming Cooke 4 mine during the year.

The average rand gold price fell by 9% in the second half of last year compared with the first half‚ but operating profit in the company’s gold division was still 60% higher at R10.16bn compared with the previous year‚ Froneman said.

Sibanye has in recent weeks warned that it is reviewing a number of its growth projects because of shrinking profit margins in the gold division‚ and that it could defer some of those projects.

The platinum division generated 238‚662oz of platinum during the year and made an operating profit of R376m.

Source:BDproDate: 2017/02/24

Bidcorp open to acquisitive and organic growth opportunities

By Pericles Anetos

Food services group Bid Corporation (Bidcorp)‚ which was unbundled from industrial conglomerate Bidvest Group‚ grew its interim revenue 5% to R67.8bn‚ the company said on Thursday.

Net profit after tax grew 21% to R2bn from R1.5bn in the matching period.

Bidcorp indicated that it saw its future as a food service provider‚ as opposed to a logistics operator.

“Our financial position is strong‚ cash generation is expected to remain robust and we retain significant headroom to accommodate expansion opportunities‚ both acquisitive and organic‚” the company said in its results statement.

The group said that it remained alert to opportunities for growth through acquisitions to expand its geographic reach and product range as well as via larger acquisitions to enter new markets.

Bidcorp said that it made small bolt-on acquisitions in Australia‚ Brazil‚ Belgium‚ Italy and Fresh UK‚ which amounted to R495.8m during the period under review.

“Management remain firmly of the view that over the medium term‚ overall returns on our internationally diversified businesses will far outstrip the negative effects of global volatility‚” the group said.

Bidcorp said that overall the global food service industry remained positive.

Bidcorp declared an interim cash dividend of R2.50 per share.

Source:BDproDate: 2017/02/24

Glencore returns to profit, capping turnaround

ZURICH - Mining giant Glencore on Thursday reported a swing back into profit, completing a dramatic turnaround driven by aggressive cost-cutting and helped by rising commodities prices.

The Switzerland-based company posted a 2016 profit of $1.4 billion (1.3 billion euros), compared to a staggering $5 billion loss the year prior.

When commodity prices nosedived in 2015, investors turned on Glencore amid concerns that the company's towering debt, which had hit $30 billion, could prove unsustainable with the value of its assets in decline.

Chief executive Ivan Glasenberg, seen as a maverick in the mining world, acted boldly to get debt under control.

He scrapped dividends, sold assets and reined in production in a campaign that trimmed debt to $15.5 billion, according to Thursday's results.

That strategy combined with "increasingly favourable fundamentals" in the commodities market has fuelled a much rosier outlook for Glencore's shareholders, Glasenberg said in a statement.

The company was weighing a special 2017 payout to reward investors who stuck with Glencore during darker days, Glasenberg said on a conference call, according to the Bloomberg news agency.

Shares were trading at 333.50 pence on the London exchange in mid-morning, a rise of 2.4 percent.

Source:AFPDate: 2017/02/24

Mondi financial year underlying profit up 3% to EUR981m

By Staff Writer

Paper and pulp group Mondi reported on Thursday low single-digit growth in full-year underlying operating profit‚ restricted by maintenance closures at its Richards Bay mill and volatility in the foreign exchange market.

Lower average selling prices in paper packaging also weighed on the financial performance. Underlying profit was up 3% to €981m in the year to December‚ from a year ago‚ as revenue fell 2% to €6.62bn.

Underlying operating profit was reduced by €75m due to the maintenance closures. “Based on prevailing market prices‚ we estimate that the impact of planned maintenance closures on underlying operating profit in 2017 will be about €80m‚” the company said in a statement. Volatility in foreign exchange rates had a net negative effect on underlying operating of €31m

The weakening of a number of emerging market currencies‚ particularly the Russian rouble‚ Turkish lira‚ Polish zloty and Mexican peso‚ affected the translation of the profits of fibre packaging and saw Russian uncoated fine paper operations focus domestically.

Underlying operating profit was off 8% to €361m while that of fire packaging rose 3% to €123m. Underlying operating profit in consumer packaging rose 12% to €121m‚ while that of uncoated fine paper rose 25% to €264m.

The company declared a final dividend of €38.19 a share‚ bringing the total to 57c‚ which was up 10% on the prior comparable period.

Source:BDproDate: 2017/02/23

Massmart FY headline earnings up 15.6% to R1.3bn

By Andries Mahlangu

Tight cost control helped Massmart fend off tough trading conditions in the year to end-December as it lifted its trading profit 11.9% to R2.6bn.

Africa’s second-largest retailer grew its headline earnings 15.6% to R1.3bn from the year-earlier period.

Total sales were up 7.7% to R91.3bn while comparable store sales rose 5.4%. Product inflation as at 6.7%.

Nineteen stores were opened and 10 closed‚ which resulted in a total of 412 stores at December 2016. Gross margin inched up to 19% from 18.9%.

Operating expenses were tightly controlled‚ increasing 7.7% over the previous year‚ and great expense control resulted in comparable expense growth of only 5.4%.

The group is split into four divisions:

• Masswarehouse‚ which houses Makro‚ grew sales 11%‚ outpacing product inflation of 6.5%. Excluding new stores‚ Masswarehouse grew sales 7.6%. Trading profit was up 4.4%.

• Masscash‚ whose brands include Cambridge Food and Jumbo Cash‚ grew sales 7.5%‚ while comparable sales rose 7.9%. Trading profit was up 28%.

• Massdiscounters‚ which houses Game and Dion Wired‚ grew sales 5.3% against product inflation of 4.8%. Excluding new stores‚ sales growth was 1.5%. Trading profit rose 54.8%.

• Massbuild grew sales 5.6% against production inflation of 4.7%. Comparable store growth was 1.7%. Trading update was up 2.7%.

The company declared a final dividend of 224.8c per share.

Source:BDproDate: 2017/02/23

Discovery 1H undiluted HEPS up 12% to 314c

Discovery announced on Thursday that undiluted headline earnings per share (HEPS) for the six months to end-December had increased 12% to 314c from 280.6c in the year-earlier period.

New business was up 15% to R8.24bn‚ excluding the new closed schemes that Discovery Health took on. Normalised profit from operations increased 13% to R3.4bn.

Normalised operating profit rose 12% to R1.18bn at Discovery Health.

At Discovery Life‚ new business grew 9% to R1.05bn compared with the year-earlier period‚ largely driven by individual new business which grew by 10.2%.

At 10.21am Discovery was up 1.79% to R121.64.

Source:BDproDate: 2017/02/23

Barclays in UK will pay billions towards cost of separation from Absa

By Robert Laing

UK bank Barclays has agreed to contribute R13bn to the cost of divorcing itself from Absa‚ the South African bank it married with much fanfare in 2005.

The announcement was made after both the UK principal and its JSE-listed subsidiary‚ Barclays Africa‚ released their 2016 financial results on Thursday morning.

Following its cut to 50.1% from 62.3% shareholding in May 2016‚ Barclays applied to the South African Reserve Bank to reduce its shareholding in Barclays Africa to less than half‚ Absa’s holding company said in a statement on Thursday.

The UK principal had agreed to pay a total of £765m to cover three expenses involved in the separation from its South African subsidiary.

Furthermore‚ Barclays will contribute 1.5% of Barclays Africa’s market capitalisation — which stood at about R134bn at Thursday’s share price of R158 — towards the establishment of a larger broad-based black economic empowerment scheme (B-BBEE).

Barclays Africa said it had already received £27.5m of the £765m in December.

Barclays’ contribution to rebranding (presumably back to Absa)‚ technology and other separation projects will be £515m.

The UK parent will contribute £195m to terminate agreements made when Barclays Africa acquired its “rest of Africa” operations in 2013.

A further £55m will be paid to cover separation-related expenses.

Source:BDproDate: 2017/02/23

Implats falls into loss as costs outpace rising output and prices

By Allan Seccombe

Impala Platinum‚ the world’s second-largest producer of the metal‚ reported an interim loss‚ withheld its interim dividend payment and lowered its full-year production and refined metal forecasts.

Implats reported a R328m loss for the six months to end-December compared with a profit of R218m a year earlier.

This was despite revenue for the year increasing by 8% to R18.2bn on improved metal prices and higher production.

The cost of sales was‚ however‚ higher‚ rising to R18.5bn from R16.8bn the year before.

The reason for the increase in costs stemmed from operating costs rising by 5% to R11.5bn‚ which was below mining inflation of 5.8% at its South African and Zimbabwean mines combined. Implats paid R717m for metal purchased by its refining division.

“Given the severe impact of safety stoppages at Impala Rustenburg and the community disruptions at Marula in the first half of the financial year‚ the full-year production estimates for these operations have been revised to 650‚000 refined platinum ounces and 80‚000 platinum ounces in concentrate‚ respectively‚” Implats said.

Implats said at the end of its 2016 financial year it expected the Impala Rustenburg mines to produce up to 710‚000oz and Marula 90‚000oz for the 2017 financial year.

The Rustenburg mines had 58 safety stoppage notices issued at the operations during the six-month period‚ resulting in lost production of 25‚000oz of platinum and R570m in revenue.

The notices‚ called Section 54 notices and which are issued by the Department of Mineral Resources‚ “posed a significant challenge for the Rustenburg team”‚ Implats said‚ adding it was in talks with the department.

Four people were killed at the Rustenburg mines during the period.

Implats lost 39‚000oz of platinum as it repaired its fire-damaged 14 Shaft during the interim period and expected the mine to return to production in March this year.

Source:BDproDate: 2017/02/23

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