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Several local companies are expected to report full-year results next week:
- Italtile: Management recently guided for headline earnings per share (HEPS) to increase between 20% and 27% y/y. The group is expected to report a weaker revenue performance overall, due to a tough consumer and operating environment. Despite price inflation of ~6.7%, net sales for the major retail brands (CTM, Italtile Retail, TopT and U-Light) declined. Manufacturing sales (Ceramic Industries, Betta Sanitaryware and Ezee Tile) grew 4.1% y/y, with volumes impacted by weaker demand, while higher input costs impacted profitability. Import sales (Cedar Point, International Tap Distributors and Distribution Centre) dropped 4% y/y amid heightened competition both locally and offshore.
- Super Group: HEPS has been guided to increase between 29.6% and 43.7% y/y. The group faced various economic and operational headwinds, including cost pressures faced by consumers and supply chain disruptions. Nevertheless, management noted that the group was still able to deliver a strong performance underpinned by significant new client wins, contract renewals, and market share gains. Growth was supported by rigorous cost management, which helped soften the impact of high inflation, elevated fuel costs and currency volatility.
- Harmony Gold Mining: In a recent trading statement, management guided that HEPS will increase between 50% and 70% y/y. In US dollar terms, HEPS will grow between 30% and 50%. The group met the upper end of FY23 production guidance of 1.4 to 1.5 million ounces at an all-in-sustaining cost (AISC) of below R900 000/kg. Underground recovered grades also exceeded the upper end of the guided 5.45 to 5.6g/t.
- Cashbuild: HEPS have been guided to decline 35% to 40% y/y. While still significant, the fall in earnings for 2H23 could be slightly less than that at the half-year mark (1H23: -39%). The group’s performance continued to suffer amid weak discretionary construction and home improvement spending, but there are early signs that downward momentum in transactions, revenue, and earnings may be stabilising.
- KAP Industrial Holdings: The company recently released an updated trading statement, with HEPS from continuing operations set to decrease between 37% and 47% y/y. From the ten-month business update, we know that Restonic, Safripol and Unitrans faced particularly challenging conditions, and while PG Bison and Feltex performed better, these businesses also struggled toward the latter part of the year. Confirmation of a working capital normalisation and commensurate reduction in debt was positive, with a tough operating environment expected to persist near term.
- Woolworths: Management has guided for adjusted headline earnings per share (HEPS) from continuing operations to be between 10% and 20% higher y/y. The bottom line was likely boosted by lower interest payments because of lower debt. The top-line number is expected to have come under pressure and margins may have softened due to price investment and rising operational costs (perhaps related to load-shedding).
- BidCorp: Per management guidance, HEPS is expected to be between 32% and 36% higher y/y. Trading momentum over the 10-month period to April continued into May and June, resulting in a record performance for the group. The group has seen good growth across all geographies and divisions. Margins across the business also held up well in the current high inflation environment, with most businesses able to pass through costs.
- Impala Platinum: The company is set to report a weaker FY23, with HEPS expected to fall by between 39% and 45% y/y due to an 18% lower dollar metal price, partially offset by a 16% weaker rand.
- Truworths International: As per a recent business update, retail sales increased 11.4% to R20.6 billion. Like its peers, the group was impacted by high inflation and thinning consumer discretionary income, which was particularly prevalent in a slowdown of retail sales performance in 2H23 and the tick up in overdue account balances. Tough trading conditions may continue to persist heading into FY24, but we think that Truworths could benefit from the credit exposure given the current macroeconomic environment, as long as the quality of the book does not meaningfully deteriorate.
Property groups, MAS plc and Fortress Real Estate, along with multinational pharmaceutical company, Aspen, will also release full-year results next week. AdvTech, Sibanye, and Santam are set to release interim results.
AECI, Mpact, Quilter and Glencore are among several other companies who will trade ex-dividend on Wednesday, 30 August 2023. AGMs will be hosted by Mr Price, Stor-age Property, and AREIT Property, amongst others. Investec Property Fund will be hosting a general meeting to consider the requisite resolutions required to give effect to the proposed change of name from Investec Property Fund, to Burstone Group Limited.
The second quarter earnings season in the US is in its final stages. Aggregate earnings across all sectors fell ~7.23%, while revenue is up ~0.84%. Of these, 385 (79.88%) boasted a positive EPS surprise and 282 (58.51%) reported a positive revenue surprise.
- On our radar this coming week we have cloud-based customer relationship management (CRM) software company, Salesforce Inc, set to release 2Q24 results. The company made a strong start to the new year in 1Q24, with double-digit growth in both the top- and bottom-line that exceeded expectations. This was driven by sustained demand across its full suite of Cloud product offerings as customers continue to increase their technology spend amid a broader transition online. Management expects 2Q24 revenue to increase ~10% y/y. The market expects adjusted earnings per share for to surge 59.3% y/y to $1.90, while revenue is set to increase 10.5% y/y to $8.5 billion.
Also notable from the US will be releases by wholesale retailers Best Buy and Costco, as well as computer hardware manufacturer, Hewlett Packard (HP).
Earnings releases in Europe are limited; however, we will be setting our sites on 2Q23/interim results from German multinational online food ordering and food delivery company, Delivery Hero, with locally listed Prosus holding a 25.4% stake in the group.
- The group released a second quarter trading update indicating that revenue growth, which had already been in the double-digit percentage range in 1Q23, further accelerated in 2Q23 to 16% at €2.6 billion. Gross merchandise value (GMV) growth accelerated to 8% to €11.1 billion, exceeding original expectations of 4%, with double-digit growth of 18% achieved outside Asia. The management team focused on driving growth initiatives and strengthening relationships with local communities during the period. Some of the initiatives included choice, affordability, customer experience and attracting high-value customers through subscription. After a competitive push in 4Q22 and 1Q23, margins are back at record levels, while category share continued to grow.
In the Asia-Pacific region, on our radar will be Ping An Insurance Group and well as electric vehicle manufacturer, BYD.
- Ping An had a strong start to the year as the re-opening of the Chinese economy after stringent Covid-19 restrictions spurred a recovery during 1Q23. The results also highlighted the benefits of the group’s in-depth reform strategies, with steady customer growth trends, and a notable recovery in the P&C insurance operating performance. Operating strength within the banking division, which likely remains driven by higher average interest earning assets, was also a key highlight. For 2Q23, analysts expect continued momentum, with adjusted EPS anticipated to grow 63.8% y/y.
- BYD is expected to deliver strong 2Q23 numbers, with adjusted EPS expected to gain 38.4% y/y, while revenue is set to increase by 63.6%. This will be supported by an anticipated more than 60% increase in unit shipments as Chinese car buyers’ demand for new-energy vehicles have seemingly held up despite a weak economy.
Economics Weekly – Slower inflation: you have seen the headlines but what does it mean for you?
After nearly two years of running above 5%, headline consumer inflation fell to 4.7% in July. While this indicates that the rate at which prices are rising compared to last year is slowing, monthly pressures persist and inflation is broader, with more items rising relative to last year. In July, monthly inflation amounted to 0.9%, which reflected a 9.6% average lift in utilities that contributed 0.7ppt. Furthermore, another bout of monthly inflation is expected in September when the current under-recovery in petrol (over R1.50) and diesel (over R2.70) will feature in the data, and now that we can no longer rely on the positive base effects which drove inflation down in the past couple of months, we should see inflation lifting. An undervalued exchange rate and a still-elevated cost of doing business in South Africa usher us into a period when the sustainability of slower inflation will be tested. This will also provide clues on the efficacy of the transmission of monetary policy since the hiking cycle started at the end of 2021. Nevertheless, it has been a challenging two years, so we opt to delve deeper into the data and provide an analysis of the shifts that may have occurred on your shopping list over the past few months.
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