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South Africa’s MTN shares slump 13% on profit warning

19 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Shares in MTN Group slumped more than 13 percent on Friday, a day after the South African mobile company flagged it would report at least a 20 percent drop in annual profit.

Shortly after the market closed on Thursday, MTN said the expected fall in profit was due to underperformance in Nigeria, where it faces a $3.9 billion fine for failing to cut off more than 5 million SIM card users by the set date.

Africa’s biggest mobile phone company said the profit warning did not include the penalty because it was still in talks with regulators about the final size of the penalty.

“There remains some uncertainty as to the final quantum (amount) of the Nigerian fine, should an out of court settlement be reached,” the company said.

MTN was handed a $5.2 billion penalty in October, prompting weeks of lobbying that led to a 25 percent reduction to $3.9 billion but the company was still not prepared to pay the lower fine, which equates to more than twice MTN’s annual average capital spending over the past five years.

 

(Reporting by Tiisetso Motsoeneng; Editing by Alexander Smith and Adrian Croft)

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Nigerian red tape prompts South African retailer to exit

19 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African retailer Truworths has pulled out of its Nigerian business citing import restrictions, its chief executive said on Thursday, a sign President Muhammadu Buhari’s attempts to boost local industry are hurting foreign investment.

As well as being unable to fill its shelves, the clothing retailer said it was struggling to pay its rent and get access to foreign exchange which has dried up due to a collapse in oil prices. Nigeria is Africa’s biggest crude exporter.

“We were unable to operate the stores properly any longer because we were unable to send merchandise to the stores because there’s regulation preventing that,” Michael Mark told Reuters in telephone interview.

In an attempt to boost local manufacturing and prop up the ailing naira, Buhari has effectively banned the import of almost 700 goods, ranging from rice to toothpicks, bread and soap.

Even non-banned items are difficult to import due to dollar shortages.

Buhari won an election a year ago on promises to end a brutal Islamist insurgency in the northeast and wean Africa’s biggest economy off oil.

However, Boko Haram militants continue to launch regular attacks and economists have questioned the logic of Buhari’s shock therapy reform tactics, particularly because of the knock-on effects of the slump in oil prices.

 

(Reporting by Tiisetso Motsoeneng; Writing by Joe Brock; Editing by Ed Cropley)

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South32 considering buyout of Anglo American manganese unit

18 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

SYDNEY (Reuters) – South32 could be among the first to buy assets placed on the block this week by South Africa’s Anglo American, with the Australian company saying it was interested in its manganese unit.

The two companies share a manganese mining and smelting business located in Australia and South Africa, with Anglo American owning 40 percent of the division.

RBC last year valued South32’s stake in manganese at around $1.8 billion, though that was before the metal halved in price.

“As a JV partner with a deep understanding of their value, we would be a buyer if the price is right,” a South32 spokeswoman said in an emailed statement, confirming a report in the Sydney Morning Herald newspaper website.

News of the interest from South32, the diversified minerals group spun out of BHP Billiton last year, comes as Anglo American turns to widespread divestment to shore up a heavily indebted balance sheet.

South32 indicated negotiations had already started to acquire Anglo American’s manganese business.

“We have a good relationship with our joint venture partner and they’ve communicated their intentions,” the statement said.

Manganese can be found in drink cans to improve resistance to corrosion. Ahead of Anglo American unveiling plans this week to cut net debt in half, South32 had been mentioned as a potential buyer of Anglo American’s niobium business.

Anglo American on Feb. 16 detailed a drastic plan to hack and slash its sprawling empire of mining assets, paring it back to diamonds, copper and platinum.

Any acquisition, though, would come at a tough time for manganese producers.

Weak prices for the metal have already led South32 to suspend mining at its Hotazel mining division in South Africa This has removed around 700,000 tonnes of manganese ore production from the global supply chain.

South32 shares were nearly 5 percent higher at A$1.26 in late trading on Thursday, double the gains of the wider market. But the stock has still lost nearly half its value since listing in May.

 

(By James Regan. Reporting by James Regan; Editing by Muralikumar Anantharaman)

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South Africa’s January headline CPI rises to 6.2% year-on-year

17 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s headline consumer inflation quickened more than expected to 6.2 percent year-on-year in January, compared with 5.2 percent in December, data from Statistics South Africa showed on Wednesday.

On a month-on-month basis, prices rose 0.8 percent compared with an increase of 0.3 percent in the previous month.

Core inflation, which excludes the prices of food, non-alcoholic beverages, petrol and energy, edged up to 5.6 percent year-on-year in January from 5.2 percent in the previous month, while also rising to 0.7 percent month-on-month.

The consensus for January headline CPI was 5.93 percent, according to a Reuters poll.

 

(Reporting by Olivia Kumwenda-Mtambo; Editing by James Macharia)

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South Africa’s Impala Platinum sees up to 20% fall in H1 profits

15 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s Impala Platinum said on Monday it expected half-year profits to fall by as much as 20 percent due to lower rand prices for its main commodity.

Headline earnings per share – a measure of profit which strips off certain one-off items – will be between 50 cents and 59 cents, a decline of between 20 percent and 10 percent.

Impala, the world No. 2 producer of the metal used for emissions-capping catalytic converters in cars, said the rand prices for platinum are down 15 percent compared to a year earlier causing the decline in profits.

Shares in Implats, which have more than halved in value over the last year, fell 0.74 percent to 35 rand by 1500 GMT.

 

(Reporting by Zandi Shabalala; Editing by James Macharia)

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ArcelorMittal South Africa seeks power producer to build new plant

12 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – ArcelorMittal South Africa is looking for an independent power producer to build an 800 megawatt gas-fired power station on land at its Saldanha steel works to help ensure its survival, Chief Executive Paul O’Flaherty said.

ArcelorMittal, which is reviewing its Saldanha operation partly due to high electricity costs, is willing to take as much as 220 MW of the plant’s capacity and the company is in talks with other industrial users and the government to sign long- term contracts for the rest.

Building an independent power plant is vital for the survival of Saldanha, O’Flaherty told Reuters, adding that state-owned utility Eskom’s rising electricity prices were unaffordable.

Electricity accounts for nearly a third of costs at Saldanha, the company’s newest and only export-focused plant, compared with less than 10 percent for the rest of the company.

“An environmental impact study is underway on our land,” O’Flaherty said adding that ArcelorMittal South Africa would not own the project.

On Friday, the company reported a slightly narrower loss than expected, sending its shares soaring.

There are also expectations that the government will give local steelmakers further protection beyond the 10 percent steel import tariff agreed in August.

Shares in ArcelorMittal South Africa were up a further 12.74 percent at 6.99 rand by 1200 GMT on Friday.

 

(Reporting by TJ Strydom and Thekiso Lefifi; Editing by Greg Mahlich)

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South Africa’s Woolworths to conserve cash as growth slows

11 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African retailer Woolworths Holdings Ltd will aim to conserve cash as growth slows in its home market, Chief Executive Ian Moir said on Thursday.

Shares in the retailer slid to a two-month low despite posting a 30.6 percent jump in first-half profit.

Woolworths, which sells upmarket food and clothing, warned rising interest rates in South Africa would further pressure consumers in Africa’s most advanced economy, where it makes nearly 60 percent of its sales.

“It would be more conservative, in what is a volatile environment, to offer scrip rather than cash,” said Woolworths Chief Executive Ian Moir, referring to dividends paid in shares rather than cash.

Shareholders will have a choice between a scrip and a cash dividend, the company said.

If all shareholders chose scrip, Woolworths would have 1.5-1.6 billion rand more for investment and to pay off debt, Moir said.

The company is committing capital to its expansion plans in Australia, said Moir, where it last year bought department store chain David Jones.

South Africa’s retailers are battling to boost sales as consumers check spending, though Woolworths has done better than rivals due to its appeal to high-income customers.

But a severe drought in southern Africa and the weaker rand is expected to stoke food price inflation, and though higher maize prices should not have a direct impact on higher income shoppers, their spending could sag.

“When we see food inflation coming through, our customers, even at the upper end, tend to buy less items,” said Moir.

Sasfin Securities analyst Alec Abraham said though Woolworths posted good operational results, Moir’s downbeat comments on South Africa’s growth outlook might have contributed to the share price fall on Thursday.

Earnings per share were affected by costs to acquire David Jones and the dilutive effects of share issues to finance the transaction and a black empowerment deal.

Headline earnings per share, the most widely watched profit measure in South Africa, which strips out certain one-off items, were up 30.6 percent at 253.5 cents for the six months ended Dec. 31.

Shares in Woolworths were down 7.5 percent at 86.37 rand by 1050 GMT, compared with a 2.1 slide in the JSE’s benchmark Top-40 index.

 

(Reporting by TJ Strydom; Editing by Subhranshu Sahu and Mark Potter)

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Lonmin will not shy away from merger or takeover

10 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

CAPE TOWN (Reuters) – Platinum producer Lonmin will not “shy away” from any merger or takeover but for now the company is focused on its plan to survive tough market conditions, its chief executive said on Tuesday.

Like its peers, Lonmin is battling sharp falls in commodities prices amid a supply glut and slowing demand growth in top consumer China. Its share price has tumbled by more than 95 percent since the start of 2015.

This has led to market speculation about a possible takeover of the 107-year old company and some analysts have said efforts so far to turn the company around were not enough despite cost cuts and a deeply discounted rights issue in December.

However, no concrete news has emerged.

“We are continuously looking at options to maximise value for our shareholders and all other stakeholders. Should it be of benefit to our shareholders and stakeholders it’s not something we would shy away from,” CEO Ben Magara told Reuters at a mining conference in Cape Town when asked if he would consider takeover offers.

He declined to say if Lonmin was in any talks with any potential parties.

The price of platinum has fallen about 30 percent year-on-year, forcing miners to sell assets and cut production and jobs. Around two-thirds of the industry, whose mines were damaged by the five-month strike in 2014, are making losses.

Magara said the company was for now focused on turning cash positive in a low price environment – which involves closing high-cost shafts and cutting jobs.

“That’s what I am worrying about. The investors have given us money and we must deliver. Investors are asking if we are going to deliver on this,” Magara said.

Hurt by a prolonged 2014 strike, rising costs and the plunging platinum price, Lonmin raised $400 million through a cash call in December.

The rights issue was undersubscribed even though it was deeply discounted, forcing the company’s underwriters to buy shares in the company and showed that investors were losing faith in the beleaguered mining sector.

The shares were priced at just a penny each on Nov. 9, a 94 percent discount to the stock’s previous session closing price of 16.25 pence on the London Stock Exchange

“I have no doubt that there will be pressure on us when we finally start making money. Will we go and put it in a project first or will we pay investors?” Magara said.

“I think it’s important that investors will get their money back first. They deserve it.”

Lonmin has said it will continue to review its services and reduce costs, mainly through job reduction, as the slide in the price of its main commodity bites further.

“We have seen cycles come and go and I suppose this shall pass but I have to admit, it’s one of the worst I have seen,” Magara said.

 

(By Olivia Kumwenda-Mtambo, Editing by James Macharia and David Evans)

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South Africa’s Bidvest to spin off, float food service unit

8 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s Bidvest Group Ltd on Monday said it plans to spin off and separately list its food business on the local stock exchange, beginning the industrial conglomerate’s latest attempt to separate its biggest division.

Bidvest, a sprawling company involved in businesses from shipping to selling household mops, has said in the past that the food business should be separated because its value was not reflected in the company’s share price.

Founder and chief executive Brian Joffe jettisoned plans to list the division in London in 2014, and rejected buyout bids for it three years earlier.

“To provide shareholders with the opportunity to participate directly in Bidvest’s food service operations, Bidvest intends to unbundle and separately list the food service business,” the company said in a statement.

The division, Bidvest’s biggest and one that contributes over half of the company’s sales of 200 billion rand ($12.51 billion), supplies pubs, restaurants and hotels in Europe, South America and Asia.

The division competes with companies such as Sysco Corp of the United States.

 

($1 = 15.9814 rand)

 

(Reporting by Tiisetso Motsoeneng; Editing by Christopher Cushing)

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South Africa must admit national drought crisis to help farmers

4 February 2016 Comments (0) Africa, Business, Latest Updates from Reuters

PRETORIA (Reuters) – South Africa must formally declare a national disaster for the government to release relief funds to help farmers through the worst drought in a century, the country’s largest grain producer group said on Wednesday.

While higher than expected January plantings saw Grain SA reduce its 2016 maize imports figure to 3.8 million tonnes from 5 million tonnes previously, late seeding has put young plants at high risk from extreme weather over their growth cycle.

With five out of nine provinces labelled disaster zones due to drought, the country now needs to acknowledge the situation nationally as farmers are starting to capitulate, Grain SA Chief Executive Jannie de Villiers told Reuters.

“Our Minister of Agriculture is well informed but I think we need leadership to declare it a disaster so that the process can be triggered,” he said.

The Agriculture Ministry did not immediately respond to request for comment by email and phone.

Should a national disaster be declared, emergency relief funds would be released from the National Treasury to eligible farmers. However, any funding would probably come too late to secure the future of farmers on the brink of going bankrupt or selling their holdings, De Villiers said.

The Mpumalanga, Limpopo, KwaZulu-Natal, Free State and North West provinces have been declared disaster zones for agriculture as a blistering drought sucks moisture from the soil and dam levels fall, causing a delay in planting crops for the crucial southern hemisphere summer season.

The South African Weather service said last week the El Nino weather pattern which triggered the historic drought is expected to persist, toughening the situation for farmers who scrambled to plant crops when rains started.

Farmers of cattle, sheep and goats have been urged by the government to cut the sizes of their herds as the drought has scorched grazing land and the 2016 maize harvest is expected to fall 25 percent from last year to 7.44 million tonnes.

Industry sources say food prices may rise 20 percent or more this year, putting upward pressure on overall inflation, which rose to 5.2 percent in December from 4.8 percent in November.

The most traded July white maize contract closed 1.6 percent higher at 4,943 rand a tonne on Wednesday. White maize for delivery in March is trading near record highs above 5,000 rand a tonne.

De Villiers also signalled trouble ahead for the subsequent crop season, saying farmers would struggle to obtain crop finance after this year’s disaster and restrictions on insurance for lost income.

“Can the farmers plant again if they don’t have crop finance? If they can’t pay their debt the farmers are not going to plant next year even if its raining.”

 

(By Zandi Shabalala. Reporting by Veronica Brown and Zandi Shabalala; editing by James Macharia and David Clarke)

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