Still no light for Dawn

To understand why industrial player Distribution & Warehousing Network (Dawn) has been in trouble for the past few years, one need look no further than the country’s struggling mining, construction and building industries and, more recently, agriculture. Add to that a global financial crisis and the lack of countercyclical spend in major infrastructure by SA’s government and you have a trifecta for disaster.

In its annual results to March 2016, Dawn posted a net loss of R758m. It has now posted an attributable loss of R637m in the year to March 2017.

As a maker of materials and tools for these sectors, including branded bathroom and kitchen fixtures, the company has been buffeted by lower mineral resources prices, foreign exchange volatility and years of political and labour instability.

Dawn is a complex business made up of about 32% manufacturing turnover and 68% from distribution. The trading arm of the company manages about 50,000 different product lines.

For many years it has been “right-sizing”. New CEO Edwin Hewitt is unequivocal: the company has long been operating below its fixed-cost breakeven point.

To remedy this, significant investment has been made to bring its manufacturing technology up to date.

Recently, though, amid continuing poor market conditions and the effects of widespread drought, the group has also been pummelled by political and economic turmoil in its Mozambican, Zimbabwean and Angolan markets, where currencies have plunged and foreign exchange has been scarce.

In SA, Dawn says, delayed government spending on major water projects has been a big obstacle to growth. Meanwhile, China has stepped on the toes of just about every market the majority shareholders of its associate company Grohe Dawn Watertech (GDW) operates in.

In late 2014, Dawn, the maker of Cobra taps and Vaal sanitaryware brands, sold 51% of GDW to Germany’s Grohe. This happened just as Europe’s biggest sanitaryware maker was being sold to Japan’s Lixil building materials company. At the time, Dawn, then headed by founder CEO Derek Tod, had been looking to globalise its manufacturing operations.

But with the multibillion-dollar merger of Grohe and Lixil, GDW became worth less than 1% of the new group’s turnover. Tod has since retired.

“As a result of that takeover, they took their eye off the ball in SA,” former Dawn CEO Stephen Connelly has said. This left Dawn critically short of working capital for a substantial period, adding to its woes.

Connelly, CEO of JSE-listed industrial products supplier Hudaco Industries for 22 years, was drafted in to stabilise Dawn during a 12-month contract period from mid-2016.

When Hewitt took over in April this year, Connelly became executive deputy chairman.

At the time of Dawn’s interim results to September 2016 Connelly said: “The results are not pretty, but the bleeding has stopped.” His comments came after a flood of top executives left the group. This followed years of insipid trading conditions and high operating costs amid prolonged labour unrest both in Dawn’s manufacturing divisions and in its major markets. But now with the R637m loss in the year to March 2017, the group has racked up a total loss of about R1.4bn in the past few years.

According to Hewitt, Dawn has been in trouble since 2009. After closing and consolidating businesses in financial 2017, staff numbers have been cut by 643 out of a total workforce of 3,200.

Despite management having taken significant costs out of the business from as far back as 2011 and reducing gearing from up to 70% to about 10% at one stage, Dawn’s position has become ever more precarious.

Meyrick Barker, an analyst at Kagiso Asset Management, says the company’s latest results comprise “yet another very poor set of numbers”. He says Dawn continues to suffer the consequences of bad decisions made by the previous “weak management team”.

Hewitt says Dawn is looking to achieve breakeven in financial 2018 — as long as SA’s economy does not stall further — and is budgeting for a profit in financial 2019. But first it has to bring its net gearing ratio down.

This shot up to 87% in financial 2017, from about 30% in financial 2016, forcing Dawn into a R358m rights issue that closed in April to help repay bridging finance and fund future operations.

Dawn’s strategy in offering to sell its remaining 49% share in GDW will leave it as the long-term “master distributor” of all Grohe products in sub-Saharan Africa, Hewitt says.

He also says there has been significant investment in GDW’s businesses.

“We now have teams of Japanese manufacturing experts in SA. Yields [on products] have already improved. The Japanese are very good at this type of thing.”

Source:Financial MailDate: 2017/07/21

Atlatsa and Amplats finally give up on cash-draining Bokoni mine

By Allan Seccombe

Atlatsa Resources and Anglo American Platinum have finally lost patience with the perennially underperforming Bokoni mine‚ putting it into care and maintenance as part of a deal that will entail the platinum giant writing off the junior miner’s R4.2bn debt.

After years of failed efforts to restructure the mine to be sustainably profitable and the financial assistance of Amplats‚ the Bokoni mine recorded R500m of cash outflow in the first six months of this year.

“In the circumstances‚ the Bokoni joint venture partners are no longer able to continue funding losses at the mine with no reasonable short to medium term turnaround prospects‚” Atlatsa said in a note to investors after suspending morning trade in its JSE-listed shares.

The financial setback prompted Atlatsa‚ the TSX and JSE-listed 51% owner of Bokoni and Amplats‚ the 49% owner‚ to investigate various options for the mine.

“All of the options assessed demonstrate significant cash outflows in the short to medium term with material execution risk‚” Atlatsa said.

“The immediate to medium-term outlook for Bokoni Mine remains negative‚ given the current weak platinum group metal pricing environment‚ which is expected to remain under pressure for the foreseeable future‚” it said.

Amplats‚ 80% held by Anglo American‚ has agreed to a suspension of interest payments and repayment of R4.2bn of current and future debt‚ which will include the cost of putting Bokoni into care and maintenance‚ until the end of 2019.

“Atlatsa will also‚ as a consequence‚ restructure its corporate head office and associated overhead costs in order to right-size for a business which will hold a single asset on care and maintenance‚ including reviewing the sustainability of its listings on various stock exchanges‚” Atlatsa said.

Amplats will buy property called Central Block and Kwanda North from Atlatsa for R300m cash.

Assuming the deal goes through‚ given the proposed moratorium on mineral rights transfers by Mines Minister Mosebenzi Zwane‚ Amplats will write off all Atlatsa’s debt.

Amplats had notified the market it no longer wanted its minority stake in the Bokoni joint venture and it was one of the last asset disposals the world’s largest platinum miner had to conclude as part of a major asset-restructuring exercise.

Both parties will remain part of the joint venture but either can divest of their interests.

Source:BDproDate: 2017/07/21

Capco manages to grow first-half net rental income

Capital & Counties Properties (Capco) managed to raise its first-half net rental income as a result of a positive performance at Covent Garden estate‚ which is located in London.

The value of the estate rose 1.5% to £2.4bn in the six months to June on a like-for-like basis‚ with the estimated rental value increasing 2.85 to £98.8m.

“There has been strong operational progress across the estate with 43 new leasing transactions signed during the period‚” CE Ian Hawksworth said in a statement.

“Our ERV [estimated rental value] target of £125m by December 2020 remains in place‚ reflecting the positive growth prospects of the estate.”

But the value of Earls Court Properties dropped 2.4% to £1.1bn in the review‚ partly reflecting amendments to its development programme‚ the company said.

The JSE-listed group said the Brexit-induced economic and political uncertainty had affected the valuation of residential-led development land‚ but had limited effect on tenants at its Garden estate.

Overall‚ group net rental rose to £32.4m‚ from £28.6m in year earlier period.

The share price was 1% weaker to R51.90 in early trade on the JSE.

Source:BDproDate: 2017/07/21

South32 falls on lower output

Diversified miner South32 produced less coal in SA in the financial year to June than last year after adverse weather conditions, but grew output of aluminium and manganese ore in response to stronger prices.

Shares in South32, which holds shorter-life assets in the southern hemisphere spun out of BHP Billiton two years ago, fell almost 3% to R28.73 on Thursday despite a generally positive production report.

The move was in line with general weakness among South African mining shares after Mineral Resources Minister Mosebenzi Zwane said he intended to halt the granting of new mining and prospecting rights and transfer of rights in response to court action by the Chamber of Mines opposing the new Mining Charter.

South32 CEO Graham Kerr said the group was committed to the transformation of the South African economy. Black entities held 26% in its local manganese mines and 8% of its coal mines, “which increases significantly when historic asset transactions are taken into account”.

South32 invested $28.8m in exploration across all its operations in the past year.

Production of almost all its commodities fell compared with last year, except for aluminium and manganese ore.

In SA, saleable production of aluminium rose 2% to 714,000 tonnes and 22 smelting pots were brought back on line. Mozal, in which South32 has a 47.1% stake, had a record year with attributable production rising 2% to 271,000 tonnes.

Saleable production of thermal coal in SA declined 9% to 28.9-million tonnes and South32 warned output would be affected into the current financial year because wet weather had delayed development at the Wolvekrans- Middelburg Complex. Saleable production of metallurgical coal from Illawarra in Australia fell 15% to 8.4-million tonnes because of geological conditions and outages at the Appin colliery. Production at Appin remains suspended while a comprehensive review of systems and processes takes place.

Although Australian manganese ore production fell 3%, output from SA rose 19% to 1.7-million tonnes. Output from South32’s Cannington mine in Australia, which produces silver, lead and zinc, was affected by an underground fire in April and technical problems.

Capital Economics said in a report last week that prices of industrial commodities had risen in the first half of 2017 because of strong import demand from China. But high stocks and tightening of state policy suggested activity would slow in the second half.


Source:Business DayDate: 2017/07/21

Trematon leaps into UK with boutique deal

Trematon Capital Investments, which holds property and private education interests mainly in the Western Cape, has made a surprise move abroad.

On Thursday Trematon announced it had invested R72m (£4.3m) in ASK Partners, a London-based boutique real estate private equity start-up.

ASK Partners specialises in sourcing funding solutions for residential and commercial developers in London.

The investment secures Trematon a 40% stake in the investment company and a 20% shareholding in the management company. Trematon will also get board and investment committee representation for both companies.

Trematon indicated that the investment would be used to underwrite loans provided by ASK Partners to developers.

Trematon CEO Arnold Shapiro said the current state of the market for development lending in the UK had created an opportunity for nonbank primary and secondary lending to developers “with excellent riskadjusted returns”.

He argued that following Brexit the property market climate in the UK offered a window of opportunity.

“Trematon now has direct access to deal flow in a very specific niche, as well as a platform to gain London-specific property and due diligence expertise, creating an avenue for future investment.”

He stressed the investment met Trematon’s return criteria and provided currency diversification in a niche where the company had existing skills.

The founders of ASK Partners are Daniel Austin, Doug King and Paul Stevens. Austin was previously the founder and CEO of Capital A Finance, a boutique real estate lending business. King was formerly a senior manager at Capital A Finance, while Stevens was a prime mover in establishing Investec Bank’s European property finance business.

In a nutshell, ASK Partners structures transactions, underwriting the loans and syndicating the investment.

Shapiro explained that to allow for the efficient recycling of capital, the loan transactions would be refinanced through a syndication process managed by ASK Partners. Around 90% of the loan value will be syndicated to high net worth individuals and 10% will be retained by the investment partners.

Shapiro said Trematon would assist in syndicating loans to high net worth South African individuals.

Trematon’s main investments sit in the Western Cape property sector — most notably in Club Mykonos, ARIA Property Group and Resi Investment Group.

More recently the company has branched into private education via an investment in Generation Education.

The company recently targeted an average internal rate of return of 20% or more over the longer term.


Source:Business DayDate: 2017/07/21

Pan African hopes projects add output

Pan African Resources is lining up a number of projects at its Evander and Barberton gold mines, putting behind it a very tough 2017 financial year in which gold output fell hard.

Pan African, which trades in London and Johannesburg, will report gold production of 173,000oz for the year to endJune compared with 204,928oz in the previous period.

Pan African expects to produce more than 190,000oz in the 2018 financial year.

Lower gold output caused by extensive repairs at its Evander shafts, which halted mining for nearly two months, and difficulties at its Barberton mines, will be likely to cause costs to rise from the cash cost of R338,242/kg before.

Net debt fell to R66.7m by the end of June from nearly R340m in 2016.

Not only has Pan African started its R1.7bn Elikhulu tailings retreatment project at Evander to add 50,000oz of gold to the group a year from the end of 2018, it also has two other projects it is looking at.

It intended spending R105m to deepen its Fairview mine in Barberton over two years to add 7,000-10,000oz of gold a year, said CEO Cobus Loots.

The project would be funded internally. The second project was to dewater and mine a flooded part of Evander. A study was under way into the options, Loots said.

The Uitkomst colliery, which was bought for R148m during 2016, was sold to Coal of Africa Limited (CoAL) for R275m in cash and shares in CoAL.

Pan African had no immediate intentions of selling its stake in the budding coal producer, said Loots in response to a question whether the R128m shareholding in CoAL was a core investment.

“It’s a company with some upside … at this sort of price we are not a seller,” he said.

ounces of gold were produced by Pan African in the year to end-June, down from 204,928oz the year before

Source:Business DayDate: 2017/07/21

Arcelor remains on the ropes

The South African government’s long delayed decision to impose higher tariffs on certain steel imports — effective from July 1 — has come too late to staunch the bleeding at SA’s largest remaining listed steel company, ArcelorMittal SA.

The company warned shareholders on Thursday that its headline losses for the six months to the end of June would be more than three times higher, at between 143c and 152c a share, than 2016’s headline loss of 44c a share.

That puts ArcelorMittal SA on track for its sixth successive year of losses. The last time the company made a full-year net profit was in 2011 (R8m).

In the intervening years, net losses have accumulated to a staggering R16.14bn.

This time round, ArcelorMittal SA blames lower margins and says that higher iron-ore and coal prices — its two main costs — have not been fully compensated for by higher steel prices. But the company has also cited unspecified “operational incidents”, unspecified impairments and the strengthening of the rand against the dollar.

ArcelorMittal SA said on Thursday that it would not comment on the trading update ahead of its results, which will be released on July 27.

The steel maker is again “exploring” more cost cuts. It says it is “assessing the profitability of various product lines and the implementation of structural changes over the next six months”.

Despite its dire performance, the four analysts who officially cover the company all have “hold” calls on the stock — with SBG Securities having upgraded its view from a “sell” as recently as July 10.

Avior, for example, has a 12month share price target of R9.66, almost double where the stock is trading now.

However, analysts will be keen to see how healthy the company’s cash position is, given its widening losses.

The company managed to raise R4.5bn in January 2016 from a deeply discounted rights offer that was nevertheless poorly supported, with only 68% of shareholders backing the cash call.

ArcelorMittal SA and its subsidiary, Saldanha Steel, are also in hock to Deutsche Bank, Absa and other lenders after it concluded a R4.5bn “borrowing base” to finance working capital in May.

ArcelorMittal’s losing streak comes despite the collapse of Evraz Highveld Steel and has clearly been instructive for the government, which quietly dropped its plans to finance a 5bn steel plant with Chinese group Hebei in 2016.

Recently, Trade and Industry Minister Rob Davies said: “We have to ensure that we maintain the primary steel manufacturing in SA.

“We have no choice actually, [if] we let it go then there will be a huge knock-on effect for the industry as a whole because we don’t have the capacity to import anyway.”

Source:Business DayDate: 2017/07/21

Bank calls off plan to retrench employees

African Bank has halted proposed retrenchments after being snowed under by applications for voluntary severance and early retirement packages, CEO Brian Riley said on Thursday.

In a bid to reach a sustainable cost base needed for its longterm strategy — including expanding to retail banking – the lender initiated consultations facilitated by the Commission for Conciliation, Mediation and Arbitration (CCMA) with the South African Society of Bank Officials (Sasbo) in May, when it offered the packages before moving on to retrenchments.

African Bank proposed cutting 650 of nearly 4,100 jobs following a decline in loan volumes, which Sasbo resisted.

The two parties abandoned consultations this week after African Bank received a high number of applications.

“The company is still in the process of evaluating some of the applications for the voluntary severance and retirement offer,” Riley said.

“We are already confident, however, that we have sufficient applications for the voluntary severance and retirement offer in the affected areas that the cost savings and other objectives of the bank have been met, without the need to progress to a … retrenchment process.”

Riley said African Bank would relay the financial effects of the process to the market shortly after August 7, when it anticipates completing the evaluation and acceptance of the applications. He declined to comment further.

Sasbo had not responded to questions by the time of going to print on Thursday.

Its assistant general secretary, Myan Soobramoney, issued a general statement saying the bank had agreed not to proceed with retrenchments at the third meeting between the union and the bank facilitated by the CCMA.

“This is a massive achievement for Sasbo and its members considering that as many as 652 employees were initially on the cutting board,” he said.

Source:Business DayDate: 2017/07/21

Vodacom data boosts revenue

Vodacom has continued its growth streak with the addition of 2.3-million subscribers, mostly prepaid, taking its total base in SA to 39.4-million in the three months to June.

MTN has 30.2-million subscribers, Cell C 15-million and Telkom Mobile four million.

However, an analyst has flagged the revenue generated from out-of-bundle rates as a potential risk. Consumers pay as much as R2 per megabyte for using the internet once they have run out of data bundles.

Vodacom SA grew service revenue 5.6% to R13.1bn. Data revenue rose 18.1% to R5.5bn, contributing 42.2% of service revenue. Consumers have raised frustrations over the high data prices and the government has requested regulators to look into the tariffs.

Vodacom CEO Shameel Joosub said the group continued to introduce “new initiatives” to reduce the out-of-bundle data spend. Some of the group’s data pricing strategy had resulted in a 56.1% increase in data bundle sales and an 18.9% reduction in the overall effective price per megabyte.

Mergence Investments portfolio manager Peter Takaendesa said Vodacom’s revenue growth in SA had remained steady despite a weaker consumer environment as evidenced by the deterioration in the latest sales updates from retailers.

However, Takaendesa said “the only key risk” in SA was that the firm was generating more than 40% of its service revenue from out-of-bundle usage and the government was likely to force prices down.

Research ICT Africa states in a report that mobile broadband services remained very expensive for low-income users.

Vodacom’s other operations in Mozambique, Lesotho, Tanzania and the Democratic Republic of Congo added 281,000 subscribers, taking the total number to 29.9-million.

However, service revenue declined 8% to R4.1bn.

Source:Business DayDate: 2017/07/21

Race on for private tertiary assets

The African private tertiary education space is hotting up.

Last week global investment firm Actis showed its intention to capitalise on the potential growth of private education in Africa with the launch of its Honoris United Universities, a Pan-African investment vehicle targeting tertiary opportunities.

This followed a decision by Actis, which has been investing in African private education since 2014, to make a strong foray into the South African market through the acquisition of distance learning specialists the Management College of Southern Africa (Mancosa) and the Regent Business School for an undisclosed sum.

Both tertiary brands offer accredited, accessible and affordable education and follows recent corporate activity trends in the fragmented local private tertiary education sector.

In the past 18 months, fastgrowing listed education counters such as PSG-controlled Curro Holdings and Advtech have broadened their tertiary reach, while investment companies RECM & Calibre (College SA) and PSG Alpha Investments (FutureLearn and ITSI) have fortified their specialist positions.

So far, however, Curro and Advtech have only made cautious moves into selected African markets.

Actis kicked off its African education ventures in late 2014 when it made an investment in Université Centrale Group, a post-secondary-education group in Tunisia. In 2016, the platform expanded to Morocco, creating a Northern African hub through its investment in Université Mundiapolis.

Coinciding with the acquisition of Mancosa and Regent was the announcement that Actis had also invested in Ecole Marocaine des Sciences de l’Ingénieur — the largest private institution in Morocco and the leading private engineering school.

Collectively Actis’ Honoris United Universities will offer more than 100 degrees — including health sciences, engineering, information technology, business, law, architecture, arts and design, media, education and political science.

According to a fact sheet, Honoris will hold an enterprise value of $275m, comprising 48 campuses that accommodate 27,000 students across nine countries.

Actis partner David Cooke said Honoris had set a target of 100,000 students within three to five years. The firm also estimated that 50% of the student base would be from SA.

Cooke said Actis had built extensive experience in private education, having invested R500m in such opportunities in China, Brazil and Africa in recent years. Asked whether a scramble for private tertiary assets might raise vendors’ pricing expectations markedly, Cooke said the Honoris expansion model was slightly different in that it was offering participation on a Pan-African platform.

A listing for Honoris could be on the cards in the longer term, Cooke said. “There could be a potential opportunity to allow access to Honoris to outside investors. So yes, a listing is something we are likely to consider at some point.”

Curro’s private education subsidiary Stadio Holdings has signalled its intention to list later in 2017.

the year that Actis started its African education ventures when it invested in Université Centrale Group, a postsecondary education group in Tunisia

Source:Business DayDate: 2017/07/21

Anglo on track to meet production targets

Anglo American’s new projects in diamonds, iron ore and coal underpin a sound set of production data for the first half of its financial year, setting up the diversified miner to meet or exceed some full-year targets.

Anglo, which has narrowed its portfolio to diamonds, platinum and copper, with bulk minerals like iron ore, coal and nickel making up the fourth leg of its business, will release interim results next Thursday.

In a production update, the miner said it had lifted output at all its divisions apart from copper and nickel, which had small declines for the six months to end June. “Through the improvements we have made to our portfolio and the efficiencies we are driving, we continue to unlock the potential of our world-class assets,” said Anglo CEO Mark Cutifani.

Output was increasing at the Gahcho Kue mine in Canada, the Minas Rio iron ore mine in Brazil and the Grosvenor coal mine in Australia.

“Production from Kumba and diamonds exceeded our expectations, while metallurgical coal and export thermal coal missed on the low side.

“Sales volumes in copperand Kumba were impacted by poor weather conditions at ports,” Macquarie said in a note, referring to data for the second quarter.

At the Kumba Iron Ore operation in SA, which Anglo considered disposing of in 2016, the turnaround of the flagship Sishen mine in the Northern Cape and improved output at the nearby Kolomela mine prompted a 1-million tonne increase in the full-year production forecast to 43-million tonnes.

De Beers, which is 85% owned by Anglo American, bumped up its interim diamond output 21% to 16-million carats, as the new Gahcho Kue mine, which De Beers shares with Canadian company Mountain Province, increased production. In the second quarter diamond output from Canada grew sixfold to 1-million carats.

Prices realised in the first half of the year, of $156 a carat, were 12% lower than a year earlier.

An analyst said the value of diamonds sold in the first De Beers sale of the year reflected the low value of diamonds sold to Indian buyers. An average price of $136 a carat in the first quarter and $194 in the second reflecting this, the analyst said.

Source:Business DayDate: 2017/07/21

Firefighting firm pays collusion fine

The first of seven firms involved in a firefighting cartel has settled with the competition authorities and paid a R327,201 fine for colluding with competitors.

Afrion Property Services, which specialises in supplying, installing and maintaining fire control and protection systems in SA and the continent, has undertaken to refrain from cartel conduct.

In addition, the company gave an undertaking to the Competition Tribunal that it would develop, implement and monitor a competition law compliance programme as part of its corporate governance policy.

The settlement followed a probe by the Competition Commission in March 2015 after the receipt of information into allegations of cartel conduct. The investigation found that from as early as 1996 to 2015 the seven companies, which operate across the continent, entered into agreements and/or engaged in a concerted practice to fix prices, divide markets and tendered collusively for contracts to supply, install and maintain fire control and protection systems.

The commission said the probe also revealed the collusive conduct was carried out through bilateral and multilateral agreements using exchange of cover prices through sharing of bills of quantities by telephone, e-mail, fax and occasional meetings.

“They also agreed to ‘respect’ each other’s allocated customers by not bidding competitively for tenders issued by those customers,” said the commission. In addition to Afrion, the companies involved are Belfa, Cross Fire, Fire Protection Systems, Fireco, Fireco Gauteng and Tshwane Fire Sprinklers.

Afrion was found guilty of colluding with Independent Fire Protection Systems between 2007 and 2012. Independent Fire Protection Systems has since ceased operating.

Source:Business DayDate: 2017/07/21

Vodacom’s revenue gains in SA offset declines in rest of Africa

By Robert Laing

Revenue growth in its home market helped Vodacom offset declines in the rest of Africa during the June quarter‚ the mobile network reported on Thursday morning.

The group’s revenue for the three months grew 3.9% to R20.7bn‚ boosted by South African revenue growth of 7.8% to R16.65bn offsetting an 8.2% decline to R4.24bn in revenue outside of SA.

Attracting more South African prepaid customers helped Vodacom compensate for declining average revenue per user (arpu).

Vodacom said prepaid arpu declined to R58/month in the June quarter from R61/month in the March quarter. It attracted an additional 2.2-million prepaid customers during the quarter‚ taking its total in SA to 34.2-million.

South African contract customers remained flat at 5.1-million‚ while arpu fell to R393/month from R401/month.

Vodacom CEO Shameel Joosub said the declining arpu was thanks to the group making its rates more affordable.

“The 9.1% and 18.9% decline in effective voice and data prices respectively over the quarter reflects our commitment to driving down the cost to communicate in SA. As I have stated previously‚ there is more work to be done on this front‚ and we will be introducing additional measures this year to give greater control to customers by improving our out-of-bundle pricing‚” Joosub said in the trading update.

Subscriber number growth of 3.9% in the Democratic Republic of Congo (DRC) to 10.8-million helped the group show a 0.9% overall increase in customers outside SA to 30-million despite declines in Lesotho and Tanzania‚ while Mozambique remained flat.

“In the DRC‚ economic weakness and decoupling of the Congolese franc from the US dollar continues to impact consumer spending. Exchange rate volatility continues to negatively impact reported growth‚” Joosub said.

Source:BDproDate: 2017/07/20

Competition Tribunal says it needs more information on maize seed market for Dow merger

By Mark Allix

The Competition Tribunal says the Competition Commission is required to consult further with interested parties in the proposed Dow and DuPont merger.

This comes after the commission recommended the approval earlier in July‚ albeit with conditions‚ of the proposed merger between DowDuPont‚ Dow Chemical Company‚ and EI DuPont de Nemours and Company (DuPont).

“The tribunal has requested further information from the commission in relation to the market for maize seed in SA‚ more specifically in relation to a licensing remedy that has been proposed by the merging parties in reaction to the commission’s concern of a significant loss of potential competition in the maize seed market as a result of the proposed transaction‚” the tribunal said on Thursday.

DowDuPont intends to buy Dow Chemical Company and DuPont. Dow’s activities in SA include the distribution of sunflower seeds‚ agrochemicals‚ material science products and food texturisers.

DowDuPont is controlled by Dow and DuPont‚ which are both listed on the New York stock exchange. DowDuPont is a newly incorporated holding company for the purposes of the proposed transaction.

It said the commission was required to consult a number of potential entrants/licensees in this market and to submit an additional report to the tribunal. The hearing of the matter will continue on August 4.

Earlier‚ the commission had recommended that the merger be approved with conditions relating to the divestiture of the entirety of the insecticide business.

Source:BDproDate: 2017/07/20

ArcelorMittal shares fall sharply after it warns of a widening loss

By Andries Mahlangu

ArcelorMittal SA’s share price on the JSE plummeted on Thursday after SA’s biggest steel producer flagged a widening in its first-half headline loss.

The share price dropped as much as 6% to below R5 a share after the company said its headline loss per share in the six months to June was expected to between R1.43 and R1.52‚ a widening of between 218% and 238% from the corresponding period a year ago.

The South African unit of the Luxembourg-based ArcelorMittal blamed the poor performance on higher costs of raw materials‚ mostly coal and iron ore‚ as well as unspecified impairments and a stronger rand.

To help mitigate the situation‚ ArcelorMittal SA said it was exploring several initiatives‚ which included cutting costs and assessing the viability of various product lines.

The company’s market cap is now at R5.8bn‚ from more than R35bn in 2010. It peaked at R265 in 2008.

Source:BDproDate: 2017/07/20

South32’s share falls after reporting decline in nearly all its mineral production

By Robert Laing

South32’s share price fell 3.4% to R28.57 on Thursday morning after its June quarter production report showed declines in nearly all of the minerals it produces.

This was the fourth quarter of its financial year‚ and of the 10 minerals South32 segments its results into‚ all but two showed production declines for the year to end-June.

The mining group unbundled from BHP in 2015 reported a 27% drop in silver production‚ a 24% drop in lead production‚ a 19% drop in metallurgical coal production and an 11% drop in zinc production from the prior financial year.

The only two minerals with increased production were manganese ore at 5% and aluminium at 2%.

South32 listed record performance of its aluminium smelters in Mozambique as one of the highlights of its financial year.

“We delivered record annual production at Mozal Aluminium and stronger aluminium volumes overall as both of our smelters continued to operate at their maximum technical capability‚” South32 CEO Graham Kerr said in the production report.

Its South African manganese mines ramping up production by 19% to 2-million tonnes compensated for a 3% decline to 3-million tonnes from its Australian operations‚ which was badly affected by heavy rainfall and Tropical Cyclone Alfred.

Its South African energy coal production fell 8% due to delays at its Wolvekrans-Middelburg Complex operations.

“While the publication of SA’s Mining Charter III has created additional uncertainty‚ its implementation has been suspended pending a judicial review. We remain committed to the country’s transformation agenda‚ with broad-based black economic empowerment entities having a 26% equity interest in our South African manganese mines and an 8% equity interest in our South African energy coal mines‚ which increases significantly when historic asset transactions are taken into account‚” South32 said.

Source:BDproDate: 2017/07/20

JSE censures African Dawn Capital over results misstatement

By Hanna Ziady

The JSE has publicly censured niche financial services company African Dawn Capital for misstating its financial results for the year to February 2014‚ which later led to it restating those results.

“The restatements had a material effect on the financial results. The loss per share increased by 22% from 3.37c to 4.11c‚ while headline loss per share increased by 57.5% from 2.61c to 4.11c‚” the JSE said via the Stock Exchange News Service (Sens) on Thursday.

This represented a breach of the JSE’s listing requirements and a failure to observe the “highest standards of care when disseminating information in the market place”‚ the JSE said.

The results for the 12 months to February 2014 were restated in African Dawn’s full-year 2015 results‚ issued in November 2015.

“In some instances‚ the errors reflected a failure by the Company to correctly apply non-complex or basic requirements of International Financial Reporting Standards‚” the JSE said.

The JSE decided to impose a public censure against the company in relation to breaches of its listing requirements‚ it said.

African Dawn Capital was not immediately available for comment.

Source:BDproDate: 2017/07/20

Lonmin shares rocket 42%, but are still down on the year

By Karl Gernetzky

Platinum miner Lonmin’s share price gained as much as 14% on Wednesday, extending a three-day rally that has returned some of the market value it has lost in 2017.

On Monday, Lonmin posted improved production figures for its third quarter, safeguarding it from a potential breach of a loan covenant with lenders.

At the close of the market on Wednesday, Lonmin’s share price was 10.2% higher at R15.98 — a gain of 42.68% for the week, but it is still down 32% for 2017. The JSE’s platinum index has fallen 3.25% for the year.

The company has faced headwinds since 2012 due to rising production costs, mainly labour related, and falling metal prices. It came under further pressure after its interim results when it reported the group’s net worth had fallen to $1.4bn.

The covenants governing Lonmin’s debt require that its tangible net worth does not fall below $1.1bn. Its market value is R932m, down from R14bn at the end of 2012, Iress data show.

Total refined platinum production was 359,680oz in the third quarter to June 30, up 3.1% year on year. It sold 487,343oz of platinum in the nine months to June 30 and Lonmin maintained its sales guidance for the year of 650,000oz to 680,000oz.

The net cash position at the end of June increased to $86m from $75m in the previous three months. Gross cash improved to $236m from $225m at the end of the second quarter.

The company also reported it had received approval from the competition authorities for finalisation of the purchase of the Pandora platinum joint venture.

The purchase, from Anglo American Platinum and Northam Platinum, still requires approval from the Department of Mineral Resources.

Momentum SP Reid analyst Sibonginkosi Nyanga said it would not be fair to say the market was overreacting to Monday’s announcement, because Lonmin shares had been oversold recently.

The share price is now at levels seen at the end of May.

In dollar terms, the platinum price has gained 2.51% in 2017. The rand has strengthened 6%.

Source:Business DayDate: 2017/07/20

Why Tito Mboweni quit PPC’s board

By Ann Crotty

Tito Mboweni’s unexpected resignation from PPC’s board has prompted speculation that it might relate to an irreconcilable disagreement about the strategic direction of the cement producer, specifically about the proposed merger with Afrisam.

PPC told shareholders on Wednesday that Mboweni, an independent nonexecutive director, had resigned with immediate effect. Mboweni, who was appointed to the board after a boardroom battle in 2014, was chairman of PPC’s social, ethics and transformation committee. The announcement of his resignation came two days after PPC told shareholders that formal talks about a merger with Afrisam were continuing.

PPC would not elaborate on reasons for the resignation and Mboweni did not respond to a request for comment. There has been no indication Mboweni is resigning from any of his other directorships, which suggests the issue is specific to PPC.

Mboweni, a former Reserve Bank governor and labour minister, is chairman of Nampak, Sacoil and Accelerate Property Fund. He is a nonexecutive director of Discovery and Alexcor and an international adviser to Goldman Sachs International.

In 2014, Mboweni unexpectedly stepped down from the chairman’s position at AngloGold Ashanti.

In February of that year, he said that because of his many professional commitments, he was stepping down, but he agreed to work closely with the new chairman, Sipho Pityana.

Mboweni was elected to the PPC board in January 2015 after the high-profile battle between the incumbent board and a group of shareholders led by Foord Asset Management, who wanted to make new board appointments. The battle was sparked by the resignation of former CEO Ketso Gordhan in September 2014.

At the height of the boardroom battle in December 2014, PPC said it received a merger proposal from unlisted rival Afrisam. Paul Stuiver, a former PPC CEO said at the time that some members of the board had wanted to merge with Afrisam and had been involved in informal talks as far back as 2010.

However, Stuiver said then that the board did not see any value in the merger for PPC’s shareholders. Despite this decision, some members of the board continued to push for it.

The board’s rejection was based on the belief the merger would result in doubling PPC’s size in SA, which was expected to remain oversupplied for several years, and did little to advance its interests in the rest of Africa. Another concern was Afrisam’s high level of debt.

Talks began in December 2014 and were abandoned in early 2015. They were resumed in February 2017. On Monday, PPC told shareholders that formal talks on a potential tie-up with Afrisam were continuing.

PPC said the merger would allow it to compete in a market dominated by multinational and regional players.

The driving force behind the merger is understood to be the Public Investment Corporation (PIC), which has poured billions of rand into Afrisam since the failed black economic empowerment buyout in 2007. The PIC holds about 65% of Afrisam and more than 15% of PPC.

Source:Business DayDate: 2017/07/20

Redefine plans to buy and delist IHL

By Alistair Anderson

Redefine International, the JSE-listed, income-focused UK property group, wants to take over and delist International Hotel Properties (IHL).

The firm wants to increase its shareholding in IHL from 17.24% to 50%, thereby growing its exposure to income-generating hotel assets which are gaining traction in the UK economy.

"This is an opportunistic acquisition, which increases the company’s ownership in a high-quality and high-yielding hotel portfolio to 50% and increases our exposure to the strong UK hotel market, while increasing our exposure to [leases linked to the retail price index]," said Redefine International CEO Mike Watters.

IHL is listed on the Euro MTF market of the Luxembourg Stock Exchange and on AltX.

The share price has disappointed since the 2013 listing, losing 14.5%, but it has recovered lately, climbing 2% in 2017.

Evan Robins of Old Mutual Investment Group said Redefine International needed to find more avenues to generate income. The fund had chosen to pay out a smaller percentage of its earnings base as dividends, keeping the rest for growth opportunities. The income it did pay out needed to come from more sources.

Redefine will buy 18,343,166 IHL shares from minority shareholders by way of a scheme of arrangement. If the scheme goes ahead, the listings of IHL’s shares will be terminated.

Source:Business DayDate: 2017/07/20

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