Steinhoff sell-off; Absa struggles; Amplats eco-battery plan; Argentina EM contagion fears

By Jackie Cameron

  • Steinhoff CEO Louis du Preez delivered a stark assessment of Steinhoff’s options at the company’s first public investor presentation since the scandal took hold, saying a radical transformation into a retail-focused investment holding company was its “only way to survive”. Steinhoff has already sold a number of assets and is looking to sell off others as well as cut jobs at its French retail chain Conforama, its management reportedly said during the presentation. In a subsequent interview, Du Preez said this would also give individual units more operational independence and decision-making power by reducing services like human resources and financing at group level, reports Reuters. Steinhoff’s total debt of over €9bn ($10.1bn) is “too high” and needs to be urgently addressed, Du Preez also told investors. “All the various debt instruments that previously existed will be re-issued. Secondly, the group at group level will not pay any cash interest,” he reportedly said.
  • Absa failed to impress investors when it released its results on Tuesday. A drop in earnings at Absa’s South African corporate and investment bank took the shine off progress at its core domestic retail business as the lender reported a 5% rise in first-half profit on Tuesday, reports Reuters. “Once a market leader, Absa has been trying to regain ground lost under the stewardship of former parent Barclays following its split from the British lender in 2017, but is battling with competition and a weak South African economy. “Its drive to regain retail banking market share at home and grow sales elsewhere in Africa helped boost headline earnings per share (HEPS) – the main profit measure in South Africa – to 918.4 cents ($0.6019) in the first half, against 877.8 cents in 2018,” says the news wire. Absa’s South African retail division, which contributes more than half of its overall earnings and has lagged behind peers, grew earnings by 4%. “That was above the flat earnings at rivals Nedbank and Standard Bank, which struggled after a shock economic contraction and spike in unemployment to an 11-year high South Africa’s banks have been struggling under the weight of a sagging economy,” says Reuters.
  • The world’s top platinum and palladium supplier has an answer to the electric-car boom that may pose a long-term threat to its biggest market: invent a new battery, reports Bloomberg. Anglo American Platinum wants to develop a lithium battery that uses platinum-group metals instead of cobalt and nickel. Amplats and Platinum Group Metals have agreed to invest up to $4m in Lion Battery Technologies to find a way to use platinum metals to keep batteries cool and create a lighter product with a greater driving range. Platinum is under pressure – prices are near a decade-low as drivers turn away from diesel engines and supplies remain ample, says Bloomberg.
  • In global news, analysts are concerned that there is risk of contagion in emerging markets from a stock market and currency crash in Argentina. The main stock market index plunged 37% in peso terms and a colossal 48% in dollar terms on Monday – rendering it the largest one-day fall in any of the 94 markets tracked by Bloomberg since 1950, bar a 62% crash in Sri Lankan stocks in June 1989, at the height of that country’s civil war, points out the Financial Times. Argentina’s peso and dollar-denominated bonds dropped again on Tuesday as market turmoil spilled into a second day following opposition candidate Alberto Fernández’s landslide victory in a primary election that dealt a severe blow to President Mauricio Macri’s re-election chances, says Reuters. The cost of insuring against an Argentine sovereign default jumped again on Tuesday, according to data from IHS Markit. Markit’s calculations price the probability of a sovereign default within the next five years at more than 72%.
  • On the JSE, miners were the big losers, with Sibanye and Gold Fields shares diving more than 10% and Harmony and AngloGold down nearly 8%. South Africa’s largest platinum-mining union has rejected initial wage offers from two of the world’s biggest producers and accused Sibanye Gold of trying to provoke a strike. The Association of Mineworkers and Construction Union said its members turned down opening proposals from Impala Platinum Holdings and Sibanye. The workers haven’t met to decide on a response to Anglo American Platinum, the union said.The top performers inched up in single digits, and included Kumba Iron Ore which gained about 3% and Truworths, which moved up just over 1%.