The local market seemed reassured by yesterday’s quarterly management statement from cigarette giant British American Tobacco (BAT) in spite of a further drop in volumes, with the share falling 0.7% to R656.60. BAT’s business model is built on being able to counter dwindling cigarette volumes with pricing power — especially in its Global Drive Brands (GDB) such as Kent, Lucky Strike, Pall Mall, Dunhill and Rothmans. Dirk van Vlaanderen comments.

Ratings agency Standard & Poor’s (S&P) yesterday slashed its assessment of Anglo American’s ability to repay its debt because of the sharp drop in iron ore prices. In a statement yesterday, S&P said it had lowered the corporate credit ratings on the company to BBB-/A-3 from BBB/A-2 and the South Africa national scale rating to zaAA from zaAA+. The outlook is stable. It said the stable outlook reflected its view of the limited downside to the rating over the coming 12 to 18 months, supported by the company’s expectations that it will complete its divestment programme by the end of 2016. Rubin Renecke comments.

Private education group Advtech has compromised on the funding structure of its proposed acquisition of small rival Maravest after two of its biggest shareholders registered opposition last week. On Friday, Advtech issued a Stock Exchange News Service statement detailing a revised transaction that would see the R450m deal settled with a combination of cash and scrip. Advtech, which owns Crawford Colleges and Trinity House, initially proposed an all-share settlement with an issue of 54.4million new shares at 802c per share to the vendors of Maravest. But Kagiso Asset Management and Coronation Fund Managers, collectively holding 40% of Advtech’s issued shares, objected vehemently. They said existing shareholders would be materially diluted by the issue as the price was pitched well below their 1,100c per share fair value estimate for the company’s shares.

Private education group Advtech looks set for a showdown with its two biggest institutional shareholders over the funding structure for a proposed R450m acquisition of smaller rival Maravest. On Tuesday, Coronation Fund Managers and Kagiso Asset Management — which collectively have a 40% stake — confirmed they were likely to vote against the Maravest transaction. The deal needs the support of 50% of Advtech’s shareholders at a general meeting next Wednesday. Simon Anderssen discusses our misgivings around the proposed transaction.

Having laid a solid foundation, dairy producer Clover Industries now wants to scale up and improve earnings through the development of new products, acquisitions and expansion into the rest of Africa. The group is exploring entry into the baby food market, taking advantage of the trust it’s earned over decades as a milk producer. Soft drinks is another sector it’s researching. Elsewhere on the continent, it’s planning to get into Angola and grow its small operation in Nigeria. However, SA remains its focus — the fragmentation of the local market means opportunities for sizeable tie-ups could be pursued. Dirk van Vlaanderen discusses the group’s deals in recent years and credits management’s disciplined approach to deal making, which has resulted in value creation for shareholders.

When the JSE began trading on Monday morning, Naspers opened at R2 001.50 per share. This was the counter’s first foray above R2 000, a price that is just below 88% higher than where it opened on April 14 last year. It closed trade at R1 980 a share. Going back two years, the surge in the share price has been even more remarkable. On April 12, 2013, Naspers opened at R565. In other words, it has almost doubled over each of the last 12 month periods. Abdul Davids comments. Click here to read

The media industry is murder right now, with newspaper circulations and advertising under pressure and no new obvious business model to replace the tired old way of the past. SA’s media companies are hoping at least part of the antidote lies in the launch of three new “wire” services – essentially agencies that sell news articles to newspapers, radio, TV stations or anyone needing content. The catalyst for this sudden rush: the demise of the South African Press Association (Sapa), the nonprofit wire service that supplied the media houses until two weeks ago, when it shut its doors. Abdul Davids comments.
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In a subdued economy like this one, where growth is pegged at around 2%, the latest retail figures from Stats SA surprised on the upside, particularly for more durable items. While overall retail trade sales increased by only 1.7% year-on-year in January, hardware, paint and glass sales were up 6.4%, while sales of fashion and leather goods increased 8.8%. Simon Anderssen comments.
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Trade liberalisation, which kicked off in the dying days of apartheid and involved slashed import tariffs, proved a huge shock to the manufacturing sector — the first of many. “Trade liberalisation was a shock which many companies, after having benefited from apartheid protectionism, probably couldn’t live with. It needed to be better calibrated and better aligned with other policy support instruments and in much closer collaboration with the sector itself,” says Garth Strachan, deputy director-general of the department of trade & industry’s industrial development unit. Abdul Davids comments in this article.
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The manufacturing sector can and must adjust to a higher cost base to stem the tide of deindustrialisation in SA. Fuelled by consumption and credit, the service sector has easily outpaced the growth of productive sectors, pointing to an unsustainable and deep structural problem. Manufacturing, which holds the key to long-term job creation, employs 1,75m people, or 11,4% of the workforce — down from 2m people and 14,6% of the labour force in early 2008. Abdul Davids offers insight into this vital sector.
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Gavin Wood discusses how 2014 presented market dislocations and structural changes that have important implications for the course of financial markets.
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