PPC gets reprieve on repaying DRC project debt

By Robert Laing

PPC has managed to secure a two-year capital holiday on repaying debt on its Democratic Republic of Congo (DRC) venture‚ it said on Friday.

The statement lilfted PPC’s share price as much as 3.2% to R8 by 12.55pm.

PPC built a $300m cement plant in the DRC in partnership with a local company‚ Barnet‚ and the International Finance Corporation (IFC). PPC owns 69% of the plant which has an annual production capacity of 1-million tonnes of cement.

In its interim results released in November‚ PPC said it had “made considerable progress in negotiating its debt obligations in SA and the DRC‚ which will result in an extended debt profile and should be capable of being serviced from internal cash generation”.

In Friday’s statement‚ PPC chief financial officer Tryphosa Ramano said: “This latest development is a major achievement in addressing our capital structure. The rescheduling of debt firstly reduces the capital requirements by PPC Barnet DRC from PPC.

“Secondly it will improve cash flows for the DRC business which in turn will allow the business additional liquidity during this ramp up phase.”

Source:BDproDate: 2018/01/19

Steinhoff boosted by update

The Steinhoff share price ticked up briefly on Thursday after the release of a “process and liquidity update” in which the group said it was seeking waivers from some European funders and that it expected to be able to pay cash interest on “all its existing financial indebtedness at the ordinary contractual rate over the near-term forecasted period”.

After spiking to R7.30 the share eased back to close at R6.93, a gain of 5.3% on the day.

In a bid to relieve some of the pressure caused by broken covenants Steinhoff will shortly ask some of its European creditors to agree to limited waivers of the usually strict conditions attached to debt covenants.

The group will request responses to its waiver proposals in the coming weeks.

“While the company is confident that it will receive sufficient support from its relevant finance providers to obtain these limited waivers, there can be no assurance that the company will be able to reach agreement with its finance providers on acceptable terms or at all,” the update read. Without the waivers, the supervisory board and its advisers may be restricted in their ability to stabilise the operations of the group.

There is no firm indication of when shareholders can expect to see the results of the eagerly awaited independent investigation by PwC.

The audit firm has been working with Steinhoff and its legal advisers in relation to the accounting irregularities flagged in December. The supervisory board has instructed PwC that the scope of the investigation is not limited in any way and has ensured it has full access to Steinhoff. “The group aims to provide an update on progress with the accounting inquiries as soon as it is able to do so.”

Steinhoff informed shareholders in December that its accounting irregularities stretched back to 2016. Since that announcement every page of the group’s 2016 integrated annual report has been stamped with the warning “Information can no longer be relied upon”.

The supervisory board expects to provide an update on the trading performance of its underlying business in the three months to end-December by the last week of February.

To achieve stability the group is attempting to ensure the trading performance of its individual business units is maintained and the uncertainty around accounting issues is resolved as quickly as possible.

In a related announcement early on Thursday, Steinhoff said Jayendra Naidoo, who represents the group’s empowerment partner, had stepped down from the supervisory board.

Naidoo said he wanted to focus his efforts on the board of Steinhoff Africa Retail (Star), of which he is chairman.

Naidoo’s Lancaster Group holds about 9% of Star. Although initially hit by fallout from the Steinhoff scandal, Star has been holding up reasonably well in recent trading.

Source:Business DayDate: 2018/01/19

Media24 poised to end Novus deal

Novus Holdings, previously part of the Naspers Group, looks set to have its third grim year in a row, with reports that it is set to lose the crucial contract to print Media 24’s newspapers and magazines to Caxton and a number of small independent printers. Industry sources say the move could save Media24 as much as R200m a year.

Caxton looks set to pick up Media24’s Gauteng newspapers and its Cape magazines, while a Durban-based printer will pick up the KwaZulu-Natal publications. The decision by Naspers subsidiary Media24 to switch from Novus to Caxton, a longterm, aggressive competitor of Novus, will be confirmed in late February when negotiations between Novus and Media24 are expected to be concluded.

The new arrangements will become effective on April 1.

On Thursday Novus confirmed it was assessing the future of its Paarl Coldset plant in Pietermaritzburg. The plant prints Media24’s KwaZulu-Natal newspapers and magazines.

On Thursday, Caxton group CEO Terry Moolman said his group was in negotiations with Media24. Executive director Piet Greyling said the final outcome would be known in March. Media24’s opportunity to renegotiate the printing contract with Novus, in place since 2001, was triggered by the death of Lambert Retief in January 2017. Retief had been CEO of Novus and a major force in building up the business. He held a 20% stake until 2015, when Novus was listed. He had also been instrumental in securing the deal with Media24, which held the remaining 80% of Novus.

In 2014 when Retief announced he wanted to sell his stake, Media24 was considered the obvious buyer. However, Caxton blocked that option when it complained to competition authorities that the move was tantamount to a change of control. For Retief to cash in his stake Novus had to be listed separately and Media24 forced to reduce its holding to 19%. It was then entitled to terminate the contract on six months’ notice after Retief’s death.

Making matters potentially worse for Novus in 2018 is Caxton’s legal challenge to the awarding of the Department of Basic Education’s lucrative deal to print 60-million books. The book printing contract is said to be worth up to R3bn over three years. Caxton wants the Constitutional Court to declare the tender award invalid and set it aside. It wants the court to order Novus to repay all profits earned on the “unlawful” contract.

Source:Business DayDate: 2018/01/19

MTN chief upbeat about voice business

MTN remains bullish about the traditional voice-calls business, even as the mobile operator gears up for a shift towards data and digital services, says CEO Rob Shuter.

He said at Deloitte’s Africa in 2018 Outlook conference that population growth, increasing SIM-card and handset penetration, as well as the potential for market share gains, meant “there is still a real business in voice and SMS”.

Sector heavyweights MTN and Vodacom are grappling with declining voice revenues as consumers turn to data-based platforms such as WhatsApp to make calls.

In the six months to June 2017, MTN’s voice revenue in SA — where SIM-card penetration far exceeds MTN’s other markets — fell 5%. But voice revenues in Nigeria and other African markets rose.

Shuter said that population growth would support this segment, adding that about 650million people lived in the 22 countries across Africa and the Middle East in which MTN operates.

“In the next three or four years, that 650-million is going to go to 700-million people, so that increases our market by 50-million.

“It’s basically the same as adding another SA to the portfolio through population growth,” he said.

Attila Vitai, CEO of Telkom’s consumer business, told Business Day this week that the parastatal was trying to “disrupt the market” by encouraging consumers to move from traditional voice calls to WhatsApp and similar applications.

“That’s where the market is going,” Vitai said.

Meanwhile, Shuter said mobile internet and digital services penetration also remained low in most of MTN’s markets.

“When you look at the adoption of mobile internet, we are talking 20%-30% across these markets,” he said.

MTN wanted to add 130- million active data customers over the next three or four years, Shuter said. The group has about 70-million data customers at present.

Thanks to population growth and market share gains, MTN’s total customer base could rise to 300-million from about 230-million over the same period, Shuter said.

Shuter said the group was “quite positive about the economic situation in the markets” where it operated.

Its three largest markets — Nigeria, SA and Iran — were all “on an improving trend”.

Source:Business DayDate: 2018/01/19

Tough times slow Massmart growth

Massmart recorded muted growth for the year to December as it battled a weaker economy and stronger rand.

In a trading update, Massmart said total sales for the 53 weeks to December 2017 increased 2.7% from 2016 to R93.7bn. Total sales for 2017 grew 1% to R92.1bn in the 52 weeks to December but comparable store sales dropped 0.8%.

The retailer is the secondlargest distributor of consumer goods in Africa, operating in 13 countries in sub-Saharan Africa through the group’s four operating divisions.

A tough trading environment characterised by weak economic growth and a stronger rand cut the retailer’s growth. Like many other retailers operating in SA in 2017, the effects of reduced consumer spending affected the business. The company’s South African stores went up 1.8%, while comparable store sales in the country declined 0.2%.

Retail sales in SA contracted in the first months of 2017, weighed down by consumer confidence sliding to record lows in 2017 as political uncertainty and inflation cut discretionary spending, but have since recovered.

Sales at Massmart’s Massdiscounters, which houses the DionWired and Game stores, decreased 2.8% with inflation of -2.5%. Masswarehouse, which is comprised of Makro and The Fruit Spot, increased 3.9% with inflation of 2.3%.

Massmart’s DIY and home improvement division, Massbuild, increased 2.4% with inflation of 3.7%, while Masscash increased only 0.4%.

But Massmart said there had been a recovery in the second half of 2017, with improved comparable sales performances in both the Massbuild and Masswarehouse divisions in SA, which it attributed to effective management of debt.

“Management of Massmart’s operating expenses and working capital remains effective,” Massmart said.

Portfolio manager at Mergence Investment managers Peter Takaendesa said Massmart reported on a mixed picture, which pointed to some improvement in volume but the numbers had not fully recovered. “Sales are not inspiring across the retail sector,” he said.

Takaendesa said pricing was a huge factor for consumers in 2017 and many retailers resorted to lowering prices to draw large numbers.

“Consumers were going for a trade-off and saying to retailers, ‘if you lower your prices we will buy more and vice versa’,” said Takaendesa.

Massmart has also had to contend with a stronger rand, which negatively affected revenue from other African countries. For the 52-week period total sales from stores outside SA grew 3.5%, with comparable store sales showing 0.8% growth when measured in currencies such as the Ghanaian cedi, Mozambican metical and Nigerian naira.

However, when measured in rands, it points to a decline of -4.8% and -7%.

The market responded positively to the trading update with the share price climbing 3.21% to close at R144.50.

Source:Business DayDate: 2018/01/19

Volkswagen SA offers ride-hailing and more with pioneer Kigali plant

Volkswagen SA (VWSA) has launched a subsidiary company in Rwanda to build cars and provide the country with transport services such as car-sharing and Uber-style ride-hailing.

MD Thomas Schaefer said on Thursday the new company, Volkswagen Mobility Solutions Rwanda, would begin operations in the second quarter of 2018. The first cars, reassembled from imported kits, could be ready in April. The company, wholly owned by VWSA, was registered this week.

The production facility, in the capital Kigali, will have an initial annual capacity of 5,000 units. The first vehicles will be the Polo Hatchback and Jetta Sedan and possibly the Teramont, a large sports utility vehicle. The Polo is built at VWSA’s Uitenhage assembly plant near Port Elizabeth. The latest version is due to be launched in SA next week.

Vehicle production and retailing in Rwanda is likely to be managed by a French company, CFAO, which already performs the same duties in Kenya, where VWSA has a small operation building Polo Vivos. Rwanda, however, is the first country where VWSA, which is responsible for all its German parent’s sub-Saharan African activities, is offering a portfolio of what are often referred to as “mobility solutions”.

Planned services will include community car-sharing, public car-sharing, shuttle services and ride-hailing. A Rwandan software development start-up, Awesomity Lab, will develop mobility apps.

VWSA has been talking to the Rwandan Development Board about the concept since 2016.

The integrated mobility concept will be a first for the VW group anywhere in the world. Reasons for selecting Rwanda, said Schaefer, included its political stability, low levels of corruption, economic growth, government support and its desire to make Kigali a “smart city”.

Development Board CEO Clare Akamanzi said: “Our country is determined to become the leading innovatorin Africa. This project is in line with Rwanda’s policies to protect the environment, create jobs, and reduce the country’s trade deficit.”

VWSA’s initial Rwandan investment would be about 20m, said Schaefer.

With the Kenyan operation up and running, and now Rwanda about to get under way, the firm is investigating possibilities in other African countries.

Schaefer has stated previously that he favours a number of regional hubs which, though small in isolation, would add up to a significant production total.


Source:Business DayDate: 2018/01/19

Lonmin warns of debt-covenant levels being breached due to impairment

By Allan Seccombe

Lonmin‚ one of the world’s major platinum producers‚ has warned its debt-covenant levels‚ which have been temporarily suspended‚ will be breached because of an impairment of its assets‚ the size of which will be released in long-awaited results on January 22.

Sibanye-Stillwater has launched a takeover bid for the whole of Lonmin and the platinum miner’s financiers have conditionally agreed to a waiver of compliance with the covenant‚ which stipulates the tangible net worth of the company may not fall below $1.1bn.

However‚ in drawing up its full-year accounts‚ which had been due to be released in November but were delayed‚ Lonmin said the non-cash impairment of its assets would reduce its tangible net worth “significantly below” the $1.1bn level.

“The … waiver will ensure this shortfall is not regarded as an event of default during the waiver period‚” the company said.

Lonmin’s lenders gave in-principle agreement to the company for the waiver “subject to credit approval and execution of the necessary legal agreements” until the Sibanye offer closed or lapsed.

Lonmin has run into difficulties a number of times‚ and while some in the market had speculated it could conduct a fourth rights issue to prop up its balance sheet‚ others said there was no ways shareholders would support such an action.

In 2015‚ Lonmin raised $400m in a poorly supported and massively discounted rights issue‚ crippling its share price. Its CEO Ben Magara and the board had unveiled a strategy of selling spare capacity in its concentrators‚ smelters and refinery‚ selling non-core assets and bringing partners into a number of key projects that Lonmin simply could not afford but had to develop.

The strategy forced the hand of Sibanye‚ which would have preferred to wait a year or two longer before launching its all-share bid for Lonmin. Sibanye has grown into one of the world’s largest platinum producers since listing in 2013.

The Lonmin assets give Sibanye the processing facilities it wanted so that it could take control of its destiny and sell refined platinum group metals from SA‚ instead of processing metal through offtake and toll treatment agreements with Anglo American Platinum.

Lonmin’s shares were trading 3% higher at R15.18 each by mid-afternoon on Thursday.

Source:BDproDate: 2018/01/19

Fedusa heads to Steinhoff offices to get access to company records

By Linda Ensor

The Federation of Unions of SA (Fedusa) and its largest affiliate‚ the Public Servants Association‚ will visit the Stellenbosch offices of troubled global retailer Steinhoff on Friday‚ to demand access to the company’s records in terms of section 26 of the Companies Act.

The two organisations have an interest in protecting the pension fund investments of their members‚ the majority of whom are public servants and members of the Government Employees Pension Fund‚ which invests through the Public Investment Corporation.

“The Companies Act determines that any person who holds or has a beneficial interest in any securities issued by Steinhoff has a right to inspect and copy the information contained in the records of the company‚ as well as any other information to the extent granted by the memorandum of incorporation‚” Fedusa general secretary Dennis George said in a statement.

“Our attorneys already informed Steinhoff in the prescribed manner and in writing according to the Promotion of Access to Information Act‚ 2000 about our intended inspection.”

He said the Companies Act also provided for an inspection of the register of members and register of directors of a company free of charge.

“It is an offence for Steinhoff to fail to accommodate any reasonable request for access‚ or to unreasonably refuse access‚ to any record that a person has a right to inspect or copy in terms of section 20 of the Companies Act. The act also makes provision that Steinhoff may not impede‚ interfere with‚ or attempt to frustrate‚ the reasonable exercise by any person of the rights in the Act‚” George said.

Public Servants Association assistant GM Leon Gilbert noted that the Companies Act entitled them access to the following specific documents: the memorandum of incorporation‚ the register of directors‚ the annual financial statements and reports to annual general meetings‚ notices and minutes of annual general meetings and the securities register.

“Once we have the documents we will determine what course of action to take‚” Gilbert said.

Source:BDproDate: 2018/01/18

Massmart to report low-single digit sales growth

Massmart expects to report low‚ single-digit sales growth in the year to end-December‚ pointing to SA’s tough trading environment.

The retailer has also had to contend with a stronger rand‚ which negatively affected revenue from other countries on the African continent‚ where the company has a large footprint.

Massmart operates in about 13 countries in sub-Saharan Africa through its Massdiscounters‚ Masswarehouse‚ Massbuild and Masscash divisions.

In a trading update on Thursday‚ the company said total sales in the 52 weeks to end-December rose just R92.1bn‚ but comparable store sales dropped 0.8%.

Total sales from South African stores were up 1.5%‚ while comparable South African store sales declined by 0.2%.

Excluding SA‚ total sales rose 3.5% in constant currency terms‚ with comparable store sales growth of 0.8%. But adjusting for the effect of a stronger rand‚ total sales dropped 4.8% and comparable store sales dropped by 7%.

Massmart‚ like other retailers‚ has felt the effects of sluggish consumer spending as a result of low economic growth.

Source:BDproDate: 2018/01/18

Resilient creates Twitter account after fake one set up in Des de Beer's name

By Robert Laing

A fake twitter account purporting to represent Resilient CEO Des de Beer was created on Thursday‚ and was promptly deleted by the social media company after the real-estate investment trust (reit) complained.

The opening of the fake social media account comes a week after Resilient’s mysterious share price crash.

Resilient’s share price closed 7.3% lower on January 10‚ and then plunged as much as 22% on January 11 before closing 4.4% lower.

The tweets from the fake account could not be found at 1.15pm on Thursday. A company spokesperson said that only three tweets were sent using the account. These did not say anything interesting‚ and the company’s complaint was the account used Resilient’s logo to make it appear legitimate.

Twitter promptly deleted the fake account once Resilient reported it‚ and the company has now opened an official account‚ which so far just says the following:


hasn’t tweeted. When they do‚ their tweets will show up here.”

Resilient’s share price was trading at R129.71 on Thursday‚ about 12% lower than its closing price on January 9 before some rumour sparked panic selling.

The Reit calmed the market to some extent on January 11 by saying it expected to report on February 8 its interim dividend would be between 13% and 13.5% higher than in matching period a year earlier.

Source:BDproDate: 2018/01/18

Jayendra Naidoo is latest Steinhoff director to resign

By Robert Laing

Jayendra Naidoo is the latest Steinhoff International director to resign with immediate effect‚ the furniture retailer announced on Thursday morning.

Steinhoff said in a statement that the vacancy Naidoo would leave in its supervisory board would be filled by a new independent director to be appointed in due course.

Naidoo would remain chairman of Steinhoff Africa Retail (Star)‚ the South African retailers in the Steinhoff group that were unbundled into a separate JSE-listing in September.

“I am looking forward to focus even more energy on the Star business. My goal continues to be to work with my fellow board members and our various stakeholders to ensure that Star continues to develop as an exceptional business‚ delivering value to the African consumer and all other stakeholders‚” Naidoo said the statement.

The reshuffles of Steinhoff’s supervisory and management boards since Markus Jooste resigned as CEO on December 5 amid an accounting scandal included Christ Wiese resigning as chairman on December 15.

Ben la Grange resigned as Star CEO the day after Jooste’s resignation to focus on his other job as chief financial officer of the parent group‚ but was replaced by Philip Dieperink on January 4.

Bank of America’s quarterly results released on Wednesday included a write-off of $292m attributed to a “a single-name non-US commercial”‚ which is believed to be Steinhoff.

Coming results from JP Morgan Chase and Citigroup are expected to show similar write-offs on their loans to Steinhoff.

Source:BDproDate: 2018/01/18

Mr Price up on sales surge

Mr Price outperformed other retailers in the three months to December, recording 8.3% growth in sales.

In 2017, the retailer bounced back from a disappointing performance in the 2016 financial year and continued this trend into the festive season. The company said it was expecting further momentum in sales growth for the two-week period from December 31 2017 to January 13 2018.

TFG recently reported a turnover growth of 6.6%, while Woolworths fashion, beauty and home delivered a disappointing 0.2% sales decline.

The latest Statistics SA data revealed on Wednesday that retail trade sales had increased by a significant 8.2% to R94.67bn year on year in November 2017 after a 3.2% rise in October to R82.43bn.

On Wednesday, the Mr Price group said retail sales and other income (RSOI) had exceeded R3bn for the first time in a single month in December 2017. It recorded RSOI growth of 8.3% to R6.9bn.

The firm said well-executed merchandise offers had resulted in lower markdowns and improved gross profit over the comparable period.

“It looks like they have isolated issues experienced in 2016 and pressed that reset button,” said Casparus Treurnicht, equity analyst at Gryphon asset managers. “This, together with their momentum in sales growth for the two weeks to January 13, will add more fuel to the retail rally we have witnessed.”

With a 12.2% sales growth, Mr Price online sales outperformed store sales, which grew 8.8%. Black Friday bolstered sales for many retailers, with cash-strapped consumers taking advantage of the frenzy.

Treurnicht said Mr Price’s apparel and sports divisions were also bouncing back. The divisional growth in online sales in MRP Apparel, MRP Sport and MRP Home grew 27.7%, 19.8% and 1.6%, respectively. Mr Price reported that the continuing strained credit environment and consumers’ preference to transact in cash resulted in a lag in credit sales growth, which meant a mere growth of 0.9%.

However, cash sales jumped 10.1%, constituting 84.4% of total sales.

Other income in the Mr Price stable grew 8.2% to R307.7m, supported by growth in its cellular division of 10.9% and insurance by 13.3%.

The retailer recorded a 6.4% lower growth, “as anticipated”, in their interest derived from their credit portfolio.

Non-South African sales increased by 4.8% to R447.7m.

The retail sector in SA was characterised by poor volumes in the first half of 2017, but it recovered slightly in the latter half of the year.

Listed retail stocks also received solid buying support for the second day running after some of them released trading updates that painted a mixed picture in the sector. Mr Price’s share price gained 1.35% to close at R253.63.

Source:Business DayDate: 2018/01/18

PIC clams up over loan to Lancaster

The Public Investment Corporation (PIC) has refused to provide any details about the R9.3bn that it provided to Lancaster 101 in 2016 to drive transformation at Steinhoff International.

Ahead of confirmation by the PIC it appears that government employees’ exposure to Steinhoff is substantially more than the R25bn indicated so far.

The R25bn relates to the PIC’s 8.11% equity stake in Steinhoff and does not take into consideration the possibility that it will have to write off much of the R9.3bn loan to Lancaster.

DA finance spokesman David Maynier said he would call PIC CEO Dan Matjila to give evidence on the role of the PIC and the Lancaster Group in the scandal surrounding Steinhoff.

Maynier told Business Day he had proposed that Matjila be one of the key witnesses in the financial committee’s public hearings into the scandal. They are expected to take place on or about January 31. Lancaster is described as Steinhoff’s empowerment shareholder. It is 51% owned by the PIC and 49% by former trade unionist Jayendra Naidoo.

Naidoo, who has had a long relationship with Christo Wieserelated companies, was appointed chairman of Steinhoff Africa Retail (Star) ahead of its JSE listing in September.

Lancaster was due to play a critical role in the plan to inject a controlling stake of Shoprite into Star. However, this plan was abandoned in the wake of the Steinhoff accounting scandal that rocked the market in early December. It is unclear what assets Lancaster holds.

Naidoo referred queries to the PIC and would only talk in general terms about the current “devastating situation”.

He told Business Day he was not sure how long it would take to get a handle on the situation.

“Right now there is a lot of attention being focused on the issues,” Naidoo said.

Maynier said he had been unable to get clarification on the extent of the PIC’s indirect exposure to Steinhoff through entities such as the Lancaster Group.

Business Day was also unable to get a response from the PIC to requests for details of its investment in Lancaster.

In September 2016, Lancaster bought 60-million Steinhoff shares at R75.98 a share in an accelerated bookbuilding exercise. The total cost of those shares was R4.6bn. They are now worth R360m.

In the schedule of its unlisted investments that was released in September 2017 the PIC said it was funding an empowerment consortium to acquire a stake in Steinhoff and to acquire equity in a special-purpose vehicle that held shares in Steinhoff. It said the investment was made to drive transformation “in an untransformed sector”.

It wanted to improve black ownership and management control at Steinhoff and boost the appointment of more historically disadvantaged individuals and black women at Steinhoff. It described the R9.3bn investment as “financially underperforming” due to subdued operational results and tax investigations by German authorities.

Source:Business DayDate: 2018/01/18

South32 cranks up manganese production

Diversified miner South32 produced 8% more manganese from its local mines in the six months to December than it previously forecast, enabling it to take advantage of favourable prices, it said on Wednesday.

Other South African manganese miners are also pushing up production. According to Statistics SA figures this week, the country’s total manganese ore output in October rose 84.6% from a year ago.

Apart from manganese, South32 produces thermal coal and aluminium from smelters in SA and Mozambique. It said recently it intended to spin off its South African energy coal business in 2018. It also operates in Australia, Brazil and Colombia.

Its shares fell 1.24% to R37.31 on the JSE on Wednesday.

South32’s 60% share of ore produced at the Northern Cape manganese mines rose 21% to 1.1-million wet metric tonnes in the half-year compared with the matching period in 2016. It has increased its forecast output for the full year to 2-million wet metric tonnes, subject to market demand. South African manganese alloy output fell 3% to 36,000 tonnes as only one of four furnaces was operating.

South32 said its Australian manganese business achieved a new output record, as did Mozal aluminium, while South African aluminium was set to increase full-year output to 720,000 tonnes compared with 2017 despite a production outage.

The South African thermal coal business produced 9% less coal in the six months at 13.4-million tonnes because of reduced demand from Duvha power station and scheduled maintenance at the Wolvekrans-Middelburg Complex.

Weaker domestic demand is expected to persist for the rest of 2018. South32 is investing R4.3bn to extend the life of its Klipspruit colliery.

There was little change to South32’s two key assets in Australia, Illawarra Coal and the Cannington polymetallic mine. Illawarra’s metallurgical coal output in the six-month period halved to 1.9-million tonnes as the Appin colliery was recovering from an extended outage and the Dendrobium longwall moved through a faulted area.

Forecast full-year output remains at 4.5-million tonnes.

At Cannington, where underground mining is coming to the end of its life, production of silver, lead and zinc fell by 33%-52% because of lower ore grades and mill throughput.

Throughput is expected to improve after the commissioning of a replacement underground crusher in March.

The full-year forecast is unchanged but depends on a significant improvement in lead and silver grades.

In a recent note on diversified miners, Macquarie said South32 remained highly cash generative and although it was likely to allocate some capital to growth options, it could still return about 2bn in share buybacks over the next four years while remaining net cash positive.

South32 CEO Graham Kerr said that despite generally good cost control measures within the business, industry costs were rising as a result of the weaker dollar, rising commodity prices and Chinese environmental policies.

Cost pressure in items such as metallurgical coal, alumina and price-linked power were particularly apparent in South32’s smelters and refineries, Kerr said. But as a producer it was a net beneficiary of these higher prices.

The half-year results are due for release on February 15.


Source:Business DayDate: 2018/01/18

Joint venture gets go-ahead with conditions

The Competition Tribunal has conditionally approved a joint venture of three international shipping companies: Nippon Yusen Kabushiki Kaisha (NYK), Mitsui OSK Lines (MOL) and Kawasaki Kisen Kaisha (KL).

The three intend to merge their container liner shipping businesses. They will share ownership in the joint venture known as Ocean Network Express (ONE) and its South African subsidiary SA JV.

The conditional approval comes after the Competition Commission originally prohibited a merger on the basis that the transaction would probably have strengthened co-ordination in the market for the transportation of cars, containers and bulk shipping services.

Before the transaction, NYK operates its shipping company in SA through Michael Cotts Maritime, while MOL operates in the country through its wholly owned subsidiary MOL SA and MOL ACE SA. KL operates through a controlled entity, K Line Shipping SA. Activities of the firms include the provision of container liner shipping, car carrier shipping and bulk shipping, terminal services, logistics services and cruises. After the transaction, they will continue to compete in car carrier shipping and the provision of bulk shipping solutions.

Conditions approved by the tribunal address concerns pertaining to the exchange of competitively sensitive information and cross-directorships in the adjacent car carrier shipping and bulk shipping businesses between the parties. The conditions prohibit a cross-pollination of employees and executives between the container liner JV and adjacent businesses.

Executive and nonexecutive directors, management, representatives and employees of ONE and SA JV — including those who are seconded from the parties or who have left employment of the parties and will be employed by ONE and/or SA JV Co — shall not receive any confidential information regarding the car carrier and bulk shipping business from any party.

Executive and nonexecutive directors who are on the board of ONE and/or SA JV shall not be involved in the day-to-day operations of the car carrier and bulk shipping company.

Source:Business DayDate: 2018/01/18

Drug firm has a plan to bypass tap water

Aspen Pharmacare’s Cape Town-based subsidiary, Fine Chemicals Corporation, is so concerned about risks posed by the region’s drought that it is investing in new infrastructure to enable it to run independently of the municipal water supply.

Fine Chemicals makes active pharmaceutical ingredients at its Epping manufacturing plant, which it exports to 42 countries. It is the only narcotics active pharmaceutical ingredient manufacturer in Africa, making products such as pain-killer ingredients codeine phosphate and morphine sulphate.

A forced shutdown would thus have a knock-on effect on Aspen’s pharmaceutical manufacturing operations.

Cape Town is in the grip of the worst drought in a century. The municipality has imposed increasingly stringent water restrictions over the past two years in an effort to curb consumption and has warned residents and businesses that the city could run out of tap water by about April 21 if demand is not cut further.

“We are taking this very seriously,” said Fine Chemicals GM Andre van der Walt. “We have cut our water consumption by 54% since November 2016. We have sunk a borehole and bought a water treatment plant, which is likely to be installed by April,” he said.

Fine Chemicals’s total investment to date on mitigating the risk to the business posed by the drought was R5m, most of which had been earmarked for water treatment, he said. The company intended to continue using borehole water once the drought broke, he said.

Once Fine Chemicals had established its own water supply, it would gauge how much it could provide to staff in the event that the city reaches Day Zero and turns off the water supply to taps. If that day arrives, Cape Town’s residents will be limited to 25l of water per person per day, distributed at 200 designated collection points.

Fine Chemicals employs just under 400 staff.

Source:Business DayDate: 2018/01/18

Kruger’s exit shows executives have know when time is up

Hanna Ziady

The departure of Nicolaas Kruger from MMI holds an important lesson for executives: know when it is your time to go or ask those you trust to tell you.

There is an unfortunate misconception that occasionally takes hold of company men and women, which is that once they have landed a big role, usually as a chief of something or other, they will forever be the right person for that role.

But the reality is that companies and the environments in which they operate change.

This is even more true in a digital age in which change is swift and often sweeping. And so it is inevitable that the management teams needed to steer companies along a successful path will need to change too.

It is tempting to argue that individuals, like companies, can move with the times, updating their skills and adapting their leadership styles. But it is less likely once they have been at a company, and particularly at the top of a company, for long.

Kruger started his career at Momentum as an actuarial assistant in July 1991, when the company was selling all its policies through brokers and years before the internet was a ubiquitous feature of insurance distribution. He climbed the ranks, becoming chief actuary in 1997, finance chief in 2007, CEO in 2009 and, finally, group CEO of MMI, the outcome of Momentum’s merger with Metropolitan, in 2010.

That is 26 years within the group, nine of those as CEO.

A study published in the Harvard Business Review that measured the strength of firmemployee relationships and firm-customer relationships against CEO tenure among 365 US companies from 2000 to 2010 found that the optimal tenure length of a CEO was just 4.8 years. The study also measured the magnitude and volatility of share returns. Boards needed to be aware that “long-tenured CEOs may be skilled at employee relations but less adept at responding to the marketplace … boards should structure incentive plans to draw heavily on consumer and market metrics in the late stages of their top executives’ terms”, the researchers found.

To be sure, Kruger has made an immense contribution at the helm of MMI, most notably overseeing the successful merger of two great insurance businesses.

But the underperformance of its retail units in recent years, the simultaneous departure of two of its executives in June 2016 and weak underwriting results suggest that his time was up. Naturally, the group’s lacklustre financial performance and disappointing shareholder returns cannot be laid squarely at the feet of Kruger, former CEO of Momentum Retail Etienne de Waal or any other individual for that matter. But they point to the fact that a fresh pair of hands had been needed for some time.

“Individuals have certain style aptitudes when it comes to leadership. While some can adapt to an organisation’s evolution, it is more likely that the organisation acquires a different style of leadership,” Debbie Goodman-Bhyat, CEO of executive search firm Jack Hammer, says.

“It is healthy and appropriate for companies to have leadership changes over time,” she says.

Shareholders certainly felt that way, prompting those holding 32% of the shares represented at MMI’s most recent annual general meeting to vote against its executive pay policy.

Goodman-Bhyat emphasises the importance of regular feedback for executives, many of whom have their heads buried in the daily grind and very little time to reflect, even on their own performance. In this respect the board and Kruger’s fellow executives could perhaps have done more.

is the number of years Kruger spent at the group, nine of which as CEO


is the optimal tenure length of a CEO, a Harvard Business Review study has found

Source:Business DayDate: 2018/01/18

Three-party international shipping joint venture gets the local nod

By Mark Allix

A joint venture involving three international shipping companies — Nippon Yusen Kabushiki Kaisha (NYK)‚ Mitsui OSK Lines (MOL)‚ and Kawasaki Kisen Kaisha (K Line) — has been given conditional approval by the Competition Tribunal.

This comes after the Competition Commission had originally prohibited a merger on the basis that the transaction would have likely strengthened co-ordination in the market for the transportation of cars‚ containers and bulk shipping services.

The three companies intend to merge their container-liner shipping businesses. They will share ownership in a joint venture known as Ocean Network Express (ONE) and its South African subsidiary‚ SA JV Co.

NYK currently operates its shipping company in SA through Mitchell Cotts Maritime‚ while MOL operates in the country through its wholly owned subsidiaries MOL SA and MOL ACE SA. K Line operates through a controlled entity‚ K Line Shipping SA.

The firms’ activities include the provision of various types of shipping services‚ including container-liner shipping‚ car-carrier shipping and bulk shipping‚ terminal services‚ logistics services and cruises.

After the transaction‚ the firms will continue to compete in car-carrier shipping and the provision of bulk shipping solutions.

Conditions approved by the tribunal address concerns pertaining to the exchange of competitively sensitive information and cross-directorships in the adjacent car-carrier shipping and bulk shipping businesses between the parties.

Broadly‚ the conditions prohibit a cross-pollination of employees and executives between the container-liner JV and adjacent businesses‚ as well as the imposition of a number of extensive monitoring and reporting mechanisms.

Executive and non-executive directors who are on the board of directors of ONE or SA JV Co shall not be involved in the day-to-day operations of the car-carrier and bulk shipping company.

Source:BDproDate: 2018/01/18

Royal Bafokeng receives nod to acquire Maseve Investments

By Karl Gernetzky

Mid-tier miner Royal Bafokeng Platinum (RBPlat) said on Wednesday that competition authorities had approved its $58m acquisition of the surface assets of Maseve Investments.

The highly anticipated transaction would also see RBPlat acquire 100% of Maseve’s shareholding for $12m‚ something still subject to certain conditions‚ the company said in a statement.

Maseve Investments is the holding company for the Maseve mine on the Western Limb of the Bushveld Complex near Rustenburg. Dual-listed Platinum Group Metals holds 82.9% of Maseve‚ and said in September 2017 it would use the cash from the sale to repay debt.

Active mining was suspended at Maseve in July 2017‚ and lender and investor support for further investment at Maseve in restructuring a more conventional mining format was not available‚ the Platinum Group Metal’s said at the time.

At 9.45am‚ RBPlat’s share price was up 3.6% to R33.99‚ having gained 21.39% so far in 2018.

Source:BDproDate: 2018/01/17

Plan to unbundle thermal coal division is on track‚ reassures South32

By Robert Laing

South32’s plan to unbundle its South African thermal coal division into a separate JSE-listed company is on track‚ it said in its December quarter production update released on Wednesday morning.

“We are also actively reshaping our portfolio‚ with SA Energy Coal to be managed as a standalone business from April. This strategic initiative will significantly simplify our organisation and unlock additional value for shareholders‚” CEO Graham Kerr said in the statement.

The resources group‚ which was spun-off from BHP in May 2015‚ announced in November that it intended to turn the division it calls SA Energy Coal (SAEC) into a standalone business.

“Once SAEC has been established as a standalone business and consistent with our objective to further transform our South African operations‚ we will commence a process to broaden ownership of SAEC. This will present opportunities for broad-based black economic empowerment entities‚ employees and communities‚ and could lead to a listing of SAEC on the JSE‚” South32 said in November.

SAEC’s saleable coal production fell 9% to 13.4-million tonnes during the six months to end-December from 14.8-million tonnes in the matching period in 2016.

Domestic sales suffered from Eskom’s Duvha power station buying less coal.

“Export coal production exceeded expectations as productivity lifted at both the Klipspruit mine and the export orientated areas of the Wolvekrans-Middelburg complex‚” the production report said.

South32 was committed to investing R4.3bn to extend the life of the Klipspruit colliery by at least 20 years‚ the production update said.

Highlights of the quarter included the group’s South African manganese mines achieving record production in the December quarter following the successful commissioning of the Wessels central block in the March quarter.

Source:BDproDate: 2018/01/17

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