Tuesday, 17 May 2011 - 20:00
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PPC and Coronation
In investment markets the evidence points to company margins and returns on equity, reverting to a mean over varying periods of time. What this means is that company margins and returns don’t expand into infinity. Often a period of poor performance is followed by a period of good performance and vice versa.
Two companies that I looked at which reported half year results to March were PPC and Coronation. They have had polar opposite recent histories, with PPC struggling in the current environment, while Coronation has produced excellent results.
PPC is the country’s largest manufacturer of cement. Revenue for the 6 months fell by 5% to R3,2 billion, but margins were squeezed as cost of sales rose 7%, due in part to higher electricity costs, diesel costs and also depreciation. The company did well to have administration and other operating expenses increased only 1%, but given the decline in margins from 41,8% to 35%, operating profit fell 26% to R828 million.
At the EPS level, this declined from 114c to 71c, down 38%.
On an after tax basis profit declined 38% to R378 million – a margin of 11,8%. The commentary from the ceo reiterated the difficult trading conditions in the local building and construction industry, with sales volumes down, pressure on selling prices, and high input cost inflation.
Despite the tough conditions, they do see some light in that although cement sales for the year to date are negative, the rate of decline has been slowing and with month on month volume comparisons, total sales for 2011 could be similar to that of 2010.
The share price declined from a peak of R52 in July 2007 to R25 on October 2008. It has essentially moved sideways ever since.
The company had warned that earnings per share would decline by between 35% and 40% and with the price having already taken a sustained knock, the price gained 3,3% to 2615c.
This morning also saw local investment fund manager, Coronation report its interim results to March. Its revenue jumped 32% to R864 million. On an after tax basis, the company’s profits rose from R226m to R299m, a gain of 32%.
At a net after tax operating profit margin level, this remained steady from 34,6% to 34,5%.
Because there is a high translation of the accounting net profit into cash flow, and because the company has a relatively low cash requirement for future growth they can pay out at least 75% of the profits by way of dividend. With the increased profitability, the dividend was raised by 57% to 80cents a share.
These were excellent numbers, driven by a combination of local stock market gains over the last 2 years and excellent performance figures from Coronation.
Coronation has a market capitalisation of R6 billion. The share price is up 117% from the beginning of 2010.
Seed is having a presentation in Cape Town and Johannesburg on the 1st June and 7 June respectively. We will cover portfolio construction and our thoughts on the current market valuation. Seats are limited, so for those interested, please mail Myrna on Myrna@seedinvestments.co.za
Ian de Lange
Tue, 17 May 2011
Shares of Barloworld rose more than 3 percent in early trade on Tuesday after the South African automotive and mining equipment leasing firm reported a sharp recovery in first earnings, aided by an upswing in demand from miners.. . .
World Markets (Spot Prices)
|JSE Top 40||17:00||28601.68||-327.98||-1.13%|
|JSE Indust 25||17:00||27586.05||-246.70||-0.89%|
|Rand / Dollar||19:59||6.9651||-0.0280||-0.40%|
|Rand / Pound||19:55||11.2840||-0.0180||-0.16%|
|Rand / Euro||19:55||9.8986||-0.0079||-0.08%|
|Rand / NZD||19:58||5.4339||-0.0265||-0.49%|
|Rand / AUD||19:55||7.3683||-0.0320||-0.43%|
|Yen / Dollar||19:59||81.4600||0.6200||0.77%|
|Euro / Dollar||19:55||0.7036||-0.0023||-0.33%|
|Dollar / Euro||19:54||1.4207||0.0049||0.35%|
|Pound / Dollar||19:55||0.6154||-0.0017||-0.28%|
Click here for the Sharenet Spot Price page
The JSE Today
|Index Name||RP||Move||% Move|
|Financial & Ind. 30||30,691.95||-252.91||-0.82%|
|Oil & Gas ||26,792.87||-542.23||-1.98%|
|Oil & Gas Producers ||14,406.03||-291.55||-1.98%|
|Basic Materials ||30,243.21||-409.61||-1.34%|
|Forestry & Paper ||14,731.08||-112.88||-0.76%|
|Industrial Metals ||28,004.43||-224.76||-0.80%|
|General Industrials ||75,422.11||-65.26||-0.09%|
|Consumer Goods ||27,745.68||-166.00||-0.59%|
|Automobiles & Parts ||3,158.92||.00||0.00%|
|Health Care ||32,327.08||75.48||0.23%|
|Food Producers ||46,976.48||-119.78||-0.25%|
|Index Name||RP||Move||% Move|
|Personal Goods ||440.95||-1.40||-0.32%|
|Consumer Services ||53,323.36||-675.14||-1.25%|
|General Retailers ||40,932.37||-459.21||-1.11%|
|Travel & Leisure ||3,687.45||15.02||0.41%|
|Support Services ||2,388.37||-13.26||-0.55%|
|Non-life Insurance ||31,050.96||-957.84||-2.99%|
|Life Insurance ||15,819.00||-78.61||-0.49%|
|General Financial ||2,240.49||-11.07||-0.49%|
|SHARIAH TOP40 ||3,157.30||-45||-1.41%|
|FTSE/JSE SHARIAH ALL||3,218.04||-42||-1.27%|
|FTSE JSE Fledgling ||4,541.22||20||0.45%|
|FTSE/JSE Alt X ||1,014.28||4||0.36%|
|SA LISTED PROPERTY ||371.32||0.21%|
|CAPPED PROPERTY ||311.57||0.27%|
|FTSE/JSE RAFI 40||6,643.03||-70||-1.04%|
|Capped Top 40||14,908.49||-167||-1.11%|
|Capped All Share||16,028.31||-154||-0.95%|
Click here for the Sharenet Index Summary page
Latest Consensus Changes**
|LHC||LIFE HEALTHCARE GRP HLDG ...||HOLD||12 May|
|CMP||CIPLA MEDPRO SA LTD||SELL||11 May|
|SUI||SUN INTERNATIONAL LTD||HOLD||11 May|
|FPT||FOUNTAINHEAD PROP TRST||HOLD||11 May|
|SPP||THE SPAR GROUP LTD||HOLD||11 May||
|Expected||Company Name||Fin. Date|
|18 May 2011||ANSYS||February 2011 (Final)|
|18 May 2011||RAC PREFS||March 2011 (Final)|
|18 May 2011||RECM||March 2011 (Final)|
|18 May 2011||TIGBRANDS||March 2011 (Interim)|
|19 May 2011||AUSTRO||February 2011 (Interim)|
|DTA||Delta EMD Ltd||17/05/2011||Confirmed|
|SAC||SA Corporate Real Estate Fund||17/05/2011||Confirmed|
|RES||Resilient Property Income Fund Ltd||17/05/2011||Confirmed|
|GFI||Gold Fields Ltd||17/05/2011||Confirmed||
Stock Exchange News Service
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