PHANTOM SHARES
The Finance Ghost: Famous Brands, do you want fries with that recovery?
Famous Brands got the short end of the pandemic stick, with Covid-19 restrictions causing great pain. At around R80 in early 2020, the share price only returned to those levels in January 2022 before plunging with the recent sell-off to as low as R58.
This volatile stock of Famous Brands gives traders plenty to think about, especially after release of a trading statement revealing recovery in headline earnings per share (HEPS) to pre-pandemic levels.
Come the market, come the volumes
For cyclical businesses, maximising volumes at the top of a cycle is key.
Sappi has made the most of highly favourable conditions in the global paper market. In the six months to March 2022, Sappi achieved 45% revenue growth and 175% EBITDA growth. The base period was heavily hit by Covid. Still, volumes are higher when Sappi needs to perform: pulp segment +9%, graphic paper segment +12% and packaging and speciality paper segment +13%.
Gold isn’t glittering
Gold has been an inflation hedge and a refuge in risk-off times. So, it should be doing well now. But it is disappointing. With modest price increases and pressure on input costs, gold miners are taking strain. Production challenges are punished, as a high fixed cost base means costs per unit climb significantly when volumes drop.
Harmony Gold is a victim. In the nine months ended March 2022, revenue was 2% higher and all-in sustaining cost up 15%. The culprit: a 34% production drop at Hidden Valley in Papua New Guinea.
Fuel prices unhelpful for forecourts
Higher fuel prices don’t bring happiness to forecourts. First, we drive less. Second, as hard-earned cash disappears into a petrol pump we are less likely to indulge in the Monster and chocolate combo special.
Kaap Agri reported a 31.7% increase in retail fuel and convenience income and only a 1.7% increase in operating profit before tax from that segment.
Good morning, sunshine
Pan African Resources gave us something to smile about this week. The mining house has commissioned a 10MW solar photovoltaic plant at Evander Gold Mines and plans to have 30MW in group solar PV capacity by 2024. DM168
After years in investment banking by The Finance Ghost, his mother’s dire predictions came true: he became a ghost.
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.
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