Ghost Bites (Bowler Metcalf | PPC | Renergen | Sasol)

Bowled over by load shedding

“Plastic converting is energy hungry” – Bowler Metcalf CEO

Some industrial companies are managing to deal with load shedding successfully. Others are not, with the difference often coming down to the engineering realities sitting behind the process.

Despite a 13% increase in revenue for the six months ended December 2022, Bowler Metcalf experienced a 25% decline in profit from operations. The biggest culprit was a 25% jump in raw materials and operating costs, with a 13% increase in staff costs not helping either.

The management team is outspoken about load shedding, which is causing absolute havoc for many South African businesses. They do not expect the full year result to be an improvement, although operating costs are expected to have a less severe impact over the full year.

The share price is down 13.3% over the past year, trading at R9.31. Substantial share repurchases were executed during the period at an average price of R10.01.

PPC jumps 20% on deal speculation

This is a perfect example of “buy the rumour” in action

Media speculation in the morning sent the PPC share price running, as reports came out on PPC apparently considering a sale of its business in Zimbabwe. The market reaction to this news tells you what people think of the Zimbabwe investment.

After the share price shot up 20%, the company formally responded to the market speculation via a SENS announcement in the afternoon. The share price didn’t move much in response to the announcement, which was a loosely worded piece that reminded the market that PPC regularly receives unsolicited approaches for various parts of the business, including PPC Zimbabwe.

This didn’t exactly squash the rumour, did it?

Renergen taps the local market for capital

The company raised over R110 million in an accelerated bookbuild

First thing in the morning, Renergen announced an intention to place 4.6 million shares, which represents around 3.2% of existing share capital. This capital will be used to support the investment required for phase 2 of the Virginia Gas Project.

In an accelerated bookbuild, the bookrunner (in this case Standard Bank) contacts institutional investors to get them to support the capital raise. The general public doesn’t get the opportunity to invest.

The capital raise was successful, raising over R110 million at a price of R24 per share, a 6.5% discount to the pre-launch price. The discount is important to entice institutions to invest.

For retail investors, this means dilution at a discount.

Sasol takes a 7% hit to the share price

The market clearly didn’t like the trading statement

For the six months to December, Sasol is expected to report core HEPS growth of between 2% and 12%. That doesn’t exactly sound terrible, yet it is clearly well below what the market wanted to see.

Despite the stronger oil price and weaker rand, Sasol’s results are uninspiring because of operational challenges in the mining business and the impact of inflationary pressures on the business and the global economy. Adjusted EBITDA is expected to be flat year-on-year, so the business is going sideways operationally.

Net impairment losses were R6.4 billion in this period, with the largest write-down being R8.1 billion in the Secunda liquid fuels refinery based on macroeconomic price assumptions and input price pressures. Aside from a couple of other much smaller impairments, there’s a reversal of R3.6 billion against Lake Charles.

Little Bites:

• Director dealings:
  • A director of Thungela has sold shares worth R5.3 million – that’s a rather large disposal, fresh off the back of the announcement of an acquisition in Australia.

• Following the resignation of Gavin Hudson, Tongaat Hulett has announced the internal appointment of Dan Marokane as CEO of the group.

• Outsurance Group announced the retirement of the CEO of the Australian business, Youi Holdings. Hugo Schreuder has been with Outsurance and was the founding CEO of Youi when it was launched in 2008. A continuity plan is underway.

• Suspended company Pembury Lifestyle Group seems to be making progress on the schools that it is trying to rezone and register as part of a strategy to get the business back on track. There’s a long way to go though, not least of all with the 2019 audit having not yet commenced. That’s not a typo.

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