CAPE TOWN – The growth environment, both global and local, continued to leave a trail of lost shareholder wealth at several once rock-solid companies on the JSE last week.
Naspers was trading 1.09 percent lower at R2094.44 on Friday morning, a 6percent decline since the multinational internet group released its interim results on Monday.
Core headline earnings increased only 8 percent to $1.7 billion (R24.89bn), well down on the double digit growth Naspers shareholders have been accustomed to in the past few years. Its key investment in China, Tencent, reportedly delivered a good financial performance.
But of concern, aside from China’s internet censorship, is slowing economic growth in China.
Tencent grew well during the years of the maturation of the Chinese economy – from gross domestic product (GDP) growth of 14.2 percent in 2007 to 6.6 percent in 2018, but there seems little doubt that the trade war with the US and escalating government debt is starting to take its toll. It is accelerating earlier forecasts of falling GDP.
In the third quarter China’s growth dropped to its lowest level in nearly three decades, with GDP at 6 percent. The figure also came in below forecasts. Many economists believe the downward trend will continue.
An internet search shows China’s debt reached 251.1 percent of GDP at the end of September, up from 245.2 percent a year earlier. China’s consumers are also feeling it, made worse by recent hikes in basic foodstuff prices. It does not bode well for internet usage there.
Nevertheless, Naspers shareholders have done well this year through the unlocking of $10bn of value through the reduction in discount to net asset value realised through the September listing of Prosus in Amsterdam, and via the listing of MultiChoice Group.
Also continuing to disappoint was Sasol’s Tuesday warning of a 20 percent slide in half-year earnings to end-December 2019.
The group is struggling with rising costs at its $13bn Lake Charles chemical project in the US and also announced last week that it had secured an additional $1bn loan facility to improve its US dollar liquidity position as the project ramps up.
More than 25 percent of its shareholders also voted against the remuneration policy at the annual meeting on Wednesday.
Sasol traded 2.38 percent lower at R266.07 on Friday morning. The share price had slipped more than 5 percent since Tuesday and more than 45 percent since April.
Not so surprising were the woes of leading diversified construction and engineering group Stefanutti Stocks Holdings, which last week reported a R973 million loss for the six months to August 31.
Lower activity due to the slump in private and government infrastructure, investment was expected to have an impact on the results, but a tender dispute with Eskom for work at Kusile power station threw a spanner in the works. Sources of additional financing are being secured.
Some green shoots of increased tender activity on roads and other infrastructure was reported and the order book looks reasonable, but one can’t help feeling the group is a long way from recovery.
The share price was a lowly 12 cents on Friday, a level where it traded around for about a week, prior to a very sudden 77 percent decline in the share from 53c on November 20, to 13c on November 22.
The share traded at around R4 last December.
Also treading weaker last week was Nampak. The share price was up 1.61 percent on Friday at R5.69, a more than 20 percent decline from the R7.17 that it traded at a week before.
In December last year the share was trading at around R15, but has steadily fallen since then.
It reported a 69 percent drop in headline earnings a share to 54.1c in the year to end-September following a R1bn devaluation loss from its Zimbabwe operation due to the hyper-inflation environment in that country.
Devaluation of the Angolan currency also impacted the group.
Revenue fell by 8 percent to R14.6bn and with no sign of improvement on the currency or economic front, Nampak will have to boost efficiencies and new markets hard in the new financial year.
South African retailer Woolworths Holdings also traded sharply lower last week. The share price was last seen 1 percent down at R51.65 on Friday, which puts it 11.5 percent lower over a week.
On Wednesday, Woolworths reported a mere 2.2 percent rise in group sales for the 20 weeks ended November 11, after a steady home market offset weaker performances at its Australian upmarket store chain David Jones. The Australian business is struggling against a weaker economy and tougher competition from online players.
Not a lot of good news from some iconic South African stocks in the past week, I am afraid.