Three JSE-listed heavyweights announced earnings guidance ahead of a busy upcoming earnings season: Aspen Pharmacare, AngloGold Ashanti and Vodacom. The market reacted positively to Aspen and AngloGold’s trading updates and less so to telecom giant Vodacom.
Aspen, whose shares have been subject to volatility following confirmation that the proposed sale of the active pharmaceutical ingredient (API) business unit had fallen through, posted a strong operational update. The business seems to be firing on all cylinders, with all-important earnings measures up by double digits on the corresponding period. Notable tailwinds included sales from the supply of Covid-19 vaccines; Aspen recently obtained approval to sell Aspen-branded vaccines throughout Africa, making these earnings sustainable. Aspen was negatively affected by adverse currency fluctuations, which makes the results that much more impressive. Aspen is a rand-hedge counter, meaning it will perform better (all things equal) when the rand weakens. That was not the case over the period in question.
Normalised headline earnings per share, which is the primary measure used by management to determine performance, was around R8 per share. Double that figure to get a quick and dirty forecasted earnings number for the year, which equates to R16. This puts Aspen on around 14 times earnings, which is probably about right for a company of its stature. Although, global leaders in its field, such as Pfizer, trade at similar multiples, which is a concern. However, Aspen’s growth prospects into emerging markets remain robust. Given the stable balance sheet, this will be a company to keep an eye on with regard to corporate action going forward. Aspen shares were up 4.7% on the day, trading at R216.70.
The world’s third largest gold miner, AngloGold, announced better than expected earnings guidance despite there being more to be desired in the numbers. The business faced a host of operational headwinds; lower sales volumes, higher costs, increased exploration and one-off expenses contributed to a lower bottom line. The miner, which no longer has any operational exposure to South Africa, outlined that disruptions as a result of Covid-19 protocols were still affecting production. This is a concern for shareholders. Given the current uncertainty regarding inflation and an imminent interest rate hike cycle, gold may be the safe haven asset that investors run to. AngloGold’s shares were up by 2.2% at R293.14.
South Africa’s largest mobile phone operator, Vodacom, announced a rather unexciting update. The telecom provider is looking to pivot into financial services via a few different channels as margins with the telecom industry are under pressure by regulatory authorities. The financial technology aspect of the business is showing signs of progress, growing by double digits. The shares were slightly down on the day, trading 1.3% lower at R144.94.
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