Johannesburg - The dramatic revaluation of the Swiss franc has resulted in completely opposite fortunes for two South African companies with Swiss interests.
Swiss National Bank (SNB) unexpectedly ended its three-year-old cap of 1.20 franc per euro on Thursday.
The bank also lowered the interest rate on sight deposit account balances that exceed a given exemption threshold to minus 0.75 percent from minus 0.25 percent.
This revaluation caused luxury goods firm Richemont’s shares to plunge, while the news caused the shares of South African-based private hospital company, Mediclinic, which owns hospitals in Switzerland, to rocket to a record high.
Richemont fell as much as 10 percent while Mediclinic shot up 9 percent both when compared with the Wednesday close on the JSE due to the strengthening of the franc.
Richemont ended at R93.93 on Friday, down 6 percent from Wednesday’s close.
Mediclinic on Friday finished at R111, up 7 percent from Wednesday’s close and after surging to a record best of R112.88 earlier on Friday.
The SNB’s decision spurred a record surge in the franc against the euro and the highest gain in more than three years versus the US dollar. At the same time, it staged a sharp appreciation against the rand.
After closing at R11.2336 to the Swiss franc on Wednesday, the lifting of the cap caused the rand to weaken to R13.8264 on Thursday, which was the weakest level for the rand against the Swiss franc in history.
Late on Friday, the Swiss franc was equal to R13.6367.
Andre Bekker, Avior Capital Markets equity research analyst, said if the currency remained at R13 against the Swiss franc then they would definitely be looking at a new and higher base for the Mediclinic price from here on.
He believed that the Swiss franc had yet to stabilise. “At the moment people are buying,” he said.
A strong franc hurts exporters and companies with factories in Switzerland, where shop-floor workers earn some of the highest wages in Europe, and that explains why Richemont and other Swiss exporters like Swatch, Holcim and Roche have fallen hard following the franc’s appreciation.
Mediclinic’s profits for the year to February are set to get a boost due to the appreciation of the Swiss franc.
Mediclinic runs 16 hospitals with 1650 beds at its Hirslanden operations in Switzerland and employs 6246.
In the half year to September results, Mediclinic reported that Hirslanden’s revenue increased by 23 percent to R8.6 billion, accounting for almost half of the group’s total revenue at R16.8bn in that period. Bekker said half of Mediclinic year earnings next year would be coming from the operations in Switzerland.
Bekker said the sudden appreciation of the Swiss franc would make a huge difference at Mediclinic. “Now they will be effectively getting more rands for (each Swiss franc earned at) their operations in Hirslanden,” he said.
He added that for investors, this was quite a boost. – Additional reporting by Bloomberg