Sasfin : PPC shares surge as they weigh sale of Zimbabwean unit

MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Stocks on the Johannesburg Stock Exchange were little changed yesterday, with the broader All-Share closing flat at 79,534. The Top-40 index also ended flat for the day. Domestic market focus for the week will be on Cyril Ramaphosa's annual State of the Nation Address due on Thursday. Looking at data released by the Reserve Bank, South Africa's net foreign reserves rose to $54.844 billion in January from $53.827 billion in December. In company news, PPC ended 20.23% higher after it was reported that the cement company are considering selling their Zimbabwean business for $200 million.

EUROPEAN MARKET COMMENTARY

European markets ended fractionally higher yesterday as investors awaited news from Fed Chairman Jerome Powell and other central bank officials. The pan-European Stoxx 600 closed up 0.15% after a choppy session. Household goods were down 0.9% while oil and gas stocks rose 2.8% by the end of the day's trading. In company news, French bank BNP reported a 7% rise in net income for 2022, taking its full-year profit figure for 2022 to 10.2 billion euros. Elsewhere, oil major BP reported record annual profits, with net profit of $27.7 billion for 2022, up from the previous year's $12.8 billion.

US MARKET COMMENTARY

US stocks were up yesterday after Federal Reserve Chair Jerome Powell's comments indicated the disinflationary process had started. On the data front, the US trade deficit came in at $67.4 billion, lower than the $68.5 billion expected by economists but is still an increase from November's $61 billion deficit. In company news, shares of Zoom were up nearly 8% after the company announced layoff plans, while shares of Royal Caribbean were up more than 2% yesterday on a good fourth-quarter earnings report.

ASIA MARKET COMMENTARY

Stocks in the Asia-Pacific traded mixed today, as news out of the US saw Federal Reserve Chairman Jerome Powell acknowledge that the central bank might stop rate hikes soon, as signs show that inflation is on the decline. US President Joe Biden's State of the Union will be watched closely to see how tensions between China and the US unfold. On the data front, India's central bank will conclude its monetary policy meeting later today with economists expecting a 25-basis point hike.

COMMODITY MARKET COMMENTARY

Gold prices were up today, on the back of a weaker US dollar after Federal Reserve Chair Jerome Powell did not take a more hawkish stance despite last week's jobs report. Meanwhile, oil prices rose today, as US crude stocks surprisingly fell. Weekly inventory data from the American Petroleum Institute industry group showed crude stocks fell by about 2.2 million barrels in the week ended Feb. 3. The US Energy Information Administration is set to release data later today that should corroborate the news of the decline in US crude stocks.

CURRENCY MARKET COMMENTARY

The rand traded higher against the dollar yesterday as investors digested Federal Reserve Chair Jerome Powell's speech made at the Economic Club of Washington. At the close, the rand traded at R17.55 against the dollar, about 0.66% firmer. Elsewhere, the dollar was down versus the euro, sterling and yen this morning on the news that the Fed's rate hikes are unlikely to increase following the resilient labour market data released late last week.

LOCAL COMPANIES

BOWLER METCALF LIMITED (BCF) +0.32%

For the 6 months ended 31 Dec 2022 Bowler Metcalf reported revenue having increased by 13% from R316.6 million to just over R358 million. Profit from operations came in at R38.5 million, from R51.2 million in the previous comparable period, representing a decrease of 25%. Net profit after tax declined by 20% from R42.5 million to R33.9 million. Earnings per share and headline earnings per share both came in at 48.39 cents per share, down 18% from the 59.37 cents per share recorded 6 months ago. An interim gross cash dividend of 15.80 cents per share for the six months ended 31 December 2022 (2021: 19.40 cents per share) has been declared and is payable to shareholders on Monday, 27 March 2023. The last day to trade cum dividend will be Monday, 20 March 2023.

SASOL LIMITED (SOL) -6.92%

Sasol are expected to deliver a mixed set of results for the six months ended 31 December 2022, benefitting from the stronger oil price, refining margins and weaker Rand/US Dollar exchange rate. This was, however, offset by the impacts of weaker global economic growth, depressed chemicals prices and higher feedstock and energy costs. Earnings per share (EPS) are expected to be between R21,55 and R23,98 compared to the prior half year EPS of R23,98 (representing a decrease of between 0% and 10%) and headline earnings per share (HEPS) are expected to be between R29,84 and R31,36 compared to the prior half year HEPS of R15,21 (representing an improvement of more than 95%). Core HEPS (CHEPS) are expected to be between R22,97 and R25,23 compared to the prior half year CHEPS of R22,52 (representing an increase of between 2% and 12%).

PPC (PPC) +20.23%

PPC, South Africa's largest cement maker, is said to be considering selling its Zimbabwe business for about $200 million. PPC's shares surged as much as 24% in Johannesburg yesterday, taking the company's market value to R4.8 billion. The company had R1.5 billion of debt as of September and is positioning itself for new road construction orders from South Africa's highways agency but should the sale materialise, the proceeds would be a significant inflow that can be used to either pay down debt or invest for future growth. PPC manages to conduct about 80% of its Zimbabwe sales in US dollars, driven by demand for its products in mining, residential construction and government-funded infrastructure projects with the demand for the building material expected to expand to 1.6 million tons this year, an increase of about 60% from 2017.

INTERNATIONAL COMPANIES

Nintendo (7974) +0.05%

Nintendo yesterday dropped the outlook for its Nintendo Switch console and games sales and slashed its profit outlook for its current fiscal year. The gaming giant expects sales volumes for the Nintendo Switch to be around 18 million units for the fiscal year ending March 2023, down from the forecasted 19 million units. With electronics makers facing a tough macroeconomic environment, Nintendo lowered their net profit outlook from 400 billion yen previously to 370 billion Japanese yen ($2.8 billion) for the current fiscal year. With sales numbers declining and a console that is over 6 years old, investors are wondering when Nintendo will release new hardware. Nintendo sold around 8.23 million Switch consoles over the December holiday period, having declined around 22% year-on-year.

Zoom (ZM) +9.85%

Shares of Zoom closed up about 9.8% yesterday after the company announced plans to cut about 15% of its workforce or around 1,300 workers. During the pandemic, Zoom benefitted from the world having to turn to video chat software to stay in touch but has since struggled to sustain such growth. Along with the decrease in staff numbers, the companies CEO said he will also take a significant pay cut and forego his corporate bonus this year as he "wants to show accountability not just in his words but in his own actions".

Ebay (EBAY) +0.38%

Shares in Ebay were slightly higher yesterday after the company announced plans to cut about 4% of its workforce or around 500 workers. The company has said that it has looked at the global macroeconomic environment over the past few months and decided that this was the best course of action to take to ensure that they can deliver better experiences for its customers and will also help them focus on areas where they can make the most impact. CEO Jamie Iannone said this will give the company more space to invest and create new roles in high-potential areas which may include customer innovations, new technologies, and key markets.

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