PGMs more than offset the iron ore troubles at African Rainbow Minerals (JSE: ARI)

This is the benefit of (at least some) diversification

African Rainbow Minerals released results for the six months to December. Although group headline earnings were up 10%, this seemingly strong performance doesn’t really tell the story of what has been going on in the business.

At segmental level, the wild deviation quickly becomes apparent. ARM Ferrous (the iron ore and manganese operations) saw a drop of 34% in headline earnings to R1.24 billion, while ARM Platinum swung wildly from a loss of R689 million to R704 million. ARM Coal tanked from profit of R182 million to a loss of R271 million.

Trying to forecast anything in this business is like betting on the direction that an unsupervised litter of puppies will run in!

Iron ore production volumes were down year-on-year, mainly because the Beeshoek Mine was placed on care and maintenance. Lower volumes mean higher unit production costs (the joys of operating leverage), made worse by above-inflation increases in costs in the operations. Iron ore headline earnings fell by 24%.

That’s still much better than the manganese division, which saw a hideous drop of 84% in headline earnings thanks to a decrease in prices and export sales volumes.

If you can believe it, despite the increase in PGM prices, the Bokoni Mine still generated a substantial loss. There’s a large mineral reserve at that mine, with plans being developed to achieve profitable production. The Nkomati mine is part of ARM Platinum and saw losses more than double, as ARM now owns 100% of that mine instead of just 50%. Chrome concentrate shipments from Nkomati began in January, so that should begin to offset care and maintenance costs.

In ARM Coal, export sales volumes were up 2% and domestic volumes fell 11%. But with a significant decline in coal costs (and a stronger rand), the modest uptick in export volumes were nowhere near enough to offset the pressures.

Just to add to the diversification here, it’s worth mentioning that the company has an investment in Harmony (JSE: HAR) and in Surge Copper in Canada. These are non-controlling stakes though.

If you manage to look through all the noise, you’ll find a business that generated a decent amount of cash and repaid debt in this period thanks to PGMs. Although there are certainly some headaches, this gave management confidence to increase the interim dividend from R4.50 to R5.00.

Another bolt-on acquisition for CA Sales (JSE: CAA)

And they are getting a controlling stake right off the bat

CA&S Group is a great example of the power of bolt-on acquisitions alongside organic growth. I always compare this to building a Lego house, with bolt-ons being small acquisitions that fit with the existing infrastructure and strategy. The other type of deal is to acquire something completely new, like building a Lego model unrelated to the house.

It’s much less difficult and risky to add a brick than it is to embark on a new build, so bolt-ons tend to be seen in a positive light in the market.

The latest example is the acquisition of a 71.19% stake in the holding company of Sunpac, a distribution and route-to-market company operating in South Africa. Sunpac has been around since the 1960s, so there’s a strong track record here. They also bring specific expertise in private label strategies, a growing area of focus for South African retailers.

There are put and call options in place over the remaining 17.7%. This is important, as you don’t want a situation where the minority shareholders are stuck in this thing forever.

The price for the initial controlling stake is R208.6 million. The options will be priced based on profits for the year ending March 2027, capped at R86 million.

Perhaps most of all, this represents further diversification for CA&S while deepening exposure to the most stable market in Africa. The share price is down 5.6% in the past year, much of which I suspect is related to market jitters around the economy in Botswana.

What is your view on small acquisitions vs. large deals?

Grindrod achieved a strong performance in FY25 (JSE: GND)

The Port and Terminals operations were a highlight

Grindrod has released results for the year ended December 2025. With core headline earnings from continuing operations up 17%, the group is doing well. This was achieved despite a revenue increase of just 1%!

The much more interesting underlying growth story is that the Maputo port delivered record volumes (up 6.3%), with the Matola and MPDC-operated terminals achieving records as well. The Port and Terminals segment achieved a 20% increase in revenue and a 44% increase in trading profit.

This was offset to a large extent on the revenue line by the performance in the Logistics segment. They attribute this to reduced rail deployment, lower graphite and container volumes, and general softness in the agency and clearing and forwarded businesses. This segment suffered a decline in revenue of around 10% and a drop in trading profit of 17.6%.

The profit performance is thus a mix effect, as the decline in Logistics wasn’t enough to offset the strong uptick in Port and Terminals on the trading profit line. Combined with strong cash generation and disposals of non-core assets, this has helped Grindrod pay significant dividends to shareholders.

A further special dividend of 43 cents per share is anticipated in April 2026.

Nibbles:

• Director dealings:
  • A prescribed officer pf WBHO (JSE: WBO) sold shares worth R10.65 million.
  • Lesaka Technologies (JSE: LSK) announced that Ali Mazanderani (the Executive Chairman) bought shares worth $150k (around R2.5 million).

• Reinet’s (JSE: RNI) sale of Pension Insurance Corporation is expected to be complete on or around 27 March 2026. The deal was first announced in mid-2025, so these things do take a while to get across the line. Major regulatory approvals for the disposal to a subsidiary of Athora Holding have now been obtained. This means that Reinet expects to receive a rather gigantic payment of £2.9 billion on the day of completion.

• Orion Minerals (JSE: ORN) released results for the six months to December 2025. This only gets a mention in the Nibbles because Orion is still in the development phase, so the important news is around funding and cash balances rather than production performance. First production is only expected to happen in the first quarter of 2027. Cash on hand as at December was $5.74 million. Importantly, the prepayment facility with Glencore (JSE: GLN) was signed after the end of this reporting period, locking in two tranches of funding worth a total of $250 million.

• Here comes another ASP Isotopes (JSE: ISO) announcement to grease the wheels of SENS. Quantum Leap Energy (as you’ve surely already guessed) has entered into a Memorandum of Understanding with a large US energy company that operates power stations. With zero mention of financial effects anywhere in the announcement, we’ve reached the point where ASP Isotopes is using SENS as a PR platform rather than a financial news system. The market tends to pay less attention after a while when the updates are relentless. It’s that old joke: if everything is awesome, then nothing is awesome.

• Cilo Cybin (JSE: CCC) announced that the CFO of the group, Reshoketswe Maggy Ledwaba, has resigned with effect from 31 March 2026. There will be a transition period until 30 April 2026, although a successor hasn’t yet been named.

• The JSE has publicly censured Mantengu (JSE: MTU) based on the contents of court records submitted to the JSE. In text messages from Mike Miller to a former director, the JSE’s opinion is that it was clear that a cautionary announcement should’ve been released for the Blue Ridge Platinum transaction in mid-2023. Instead, the formal terms for the deal were only announced in October 2024. That’s more than a year after the date on which the JSE feels that information could no longer have been kept confidential. The JSE has therefore publicly censured Mantengu itself (only the company – not any specific directors). There’s no monetary fine attached to this censure, as that is reserved only for the most blatant disregard for the Listings Requirements (usually including fraud).