Slasher's coffee beans

Jozi, Jozi. Hey. Nersa announcement moving markets? Nope, baked in the cake. More likely lower commodity prices. And when the US markets opened, surprise, we took our direction. Perhaps we should just open during their hours. No really. The best part of this all is that 14 March the clocks in the US are moved an hour ahead and we get an extra hour, a precious hour extra of US trading in our day. In the UK and Europe it is an extra two weeks, 28 March that they turn their clocks forward and then we will be online with them. And then the first hour won’t feel like a dead spot. Because direction is taken from Europe. Session end we closed at the top end of the day, but still 122 points lower on the Jozi all share index to 26933.

Nedbank results this morning for the full year to end December 2009. They note an improving credit loss ratio in their second half of the year, indicating that there is some stability returning. Nedbank has increased their reserves ratio to 14.9 percent. For the full year headline earnings were 4.826 billion Rands, translated to per share 983 cents.

Business banking still very profitable. Nedbank retail smashed, actually made a loss, but those numbers at retail include Nedbank Bancassurance and Nedbank Wealth. Impairments up just over 35 percent in that retail division. Total loans advanced across all business divisions, 450 billion Rands, up 3.7 percent 2009 versus 2008. Nedbank capital up sharply, 16 percent, Nedbank business banking down by 9.4 percent. Total loans advanced to Nedbank retail, 157.5 billion Rands. The other big loan book, Nedbank corporate, at 137 billion Rands unchanged on the year.

Total deposits, 469.4 billion Rands at the end of the period, slightly better than at the end of 2008. Second biggest deposit taker in the country. Outlook, measured really, like everyone expecting the economy to advance this year, that 2.2 percent target for the South African economy looks slightly low. Consumers are expected to start feeling better towards the end of the year. Average, but hugely profitable.

Exxaro out with their full year results to December this morning too. Only, and I say this is the nicest possible way, see revenue decrease by 8 percent. Headline earnings per share much lower. Down 30 percent to 729 cents, dividend for the full year 200 cents. Higher debt. Outlook: The group expects the global demand for coal to increase with the demand for local power station coal anticipated to remain strong. The domestic demand for steam and metallurgical coal is however expected to be firmer but still to remain subdued in 2010. Coal exports may be affected by the availability of rail and port allocation at RBCT.

Massmart, our favourite retail stock over here at Vestact with results this morning, 347 cents per share worth of earnings, 252 cents per share dividend, better on revenue, lower on earnings. Sales growth across all their business divisions, strong growth across their Massbuild division interestingly, but Masscash did really well. On a comparable basis though, those are stores that were in operation at the same time, half a percent lower on all sales.

It is the “Game” brand that will grow strongly across Africa, the Massdiscounters group, opened 6 Game stores, closed one and opened 4 Dion Wired stores, I quite like them. 10 in total now. Massbuild, think the Builders Warehouse divisions, 88 stores in total. Yowsers. 290 stores across the entire group with trading space, floor space at a whopping 1.164 million square metres. A rugby union field has a maximum size of 7000 square metres. How many fields will fit into the Massmart trading space?

OK, so what are their prospects for the full year: For the 34 weeks to 21 February 2010, total sales increased by 6,7% and comparable sales increased by 0,4%, showing an encouraging turnaround that seems to have commenced in mid-December 2009. These recent sales trends suggest that the worst is behind us, and should the current trends and currency values continue, Massmart could comfortably grow operating profits, before foreign exchange, in the second half and perhaps even for the 2010 financial year.

Sounds like Massmart are a little more upbeat on the consumer than the fellows over at Nedbank, who seem to indicate that the consumer has a longer road to travel. We seem to think that the big box retailer model is unstoppable. Why would you want to go buy A4 paper and camping chairs and birthday stuff at different places? All in one place here. People with less time on their hands will pay a little more for convenience, at these shops you don’t pay more, the pricing is very competitive too. I think over the next five years distribution centres will be more key, a bigger online presence too.

Discovery Holdings results yesterday. Very impressive. One important note that post the budget speech, the risks in the short term of the NHI have declined. Essentially Discovery are the leading healthcare administrator in South Africa, the chief Adrian Gore is really well regarded, seems a really fit fellow you would say. I suppose if you are the face of the business, then you had better look healthy. The market liked the results. Quite a lot really.

Dear Eskom. Get lost. Thanks so much. Oh, and the one thing that we are all desperate to know, how are you going to deal with your internal inefficiencies? You know, I knew a management type for Eskom on the South Coast of KZN who played golf five afternoons a week. Not quite, but a lot. And got paid a lot of money to do it, i.e. do very little. You will be happy to know that he moved to Australia. I know a fellow who does contract work for Eskom in Jozi and he says you can bill them twice what is the acceptable. And then he laughed.

Staying with laughing. Ha-ha. From the Businessday: COSATU spokesperson, Patrick Craven says, “It will have a very serious effect on the economy and on individuals. While we note that Eskom’s outrageous 35% increase has been rejected, 25,8% is still more than four times the rate of inflation and is therefore totally unacceptable.”

OK, I thought you (yourself and COSATU) want inflation targeting scrapped. So why would you care if it is four times the rate of inflation? Or is this logic unfair? Perhaps. I said that I thought that nobody would be happy with this result. Not business, not the consumer and not Eskom, because they would want a great deal more, remember that initially Eskom applied for 45 percent per annum.

Because Eskom needs to embark on a 385 billion Rands expansion plan, this needs to be funded by ours truly, it would be disastrous for government to have to part with their stake in the energy provider.

OK, but lets actually go to the release from the National Energy Regulator with a long winded title: NERSA’S DECISION ON ESKOM’S REQUIRED REVENUE APPLICATION – MULTI-YEAR PRICE DETERMINATION 2010/11 TO 2012/13 (MYPD 2)

The average residential tariff is going to go from 60.6 cents per kilowatt hour in 2010/2011 to 78.62 cents per kilowatt hour. That sounds like a lot to me. You know, the one thing that everybody always discounts is the consumers ability to adapt to certain situations. I suspect everyone will now be forced to save money and as such Eskom efforts that have not succeeded previously will start to bear fruit.

New York, New York. A good session for the street, Ben Bernanke testimony calming the views of those that thought that higher rates might be around the corner. Not to be guys. Low rates for the time being. And the deficit, that is a big problem. Toyota president, Toyoda, breaking down in front of a senate grilling. Bernanke dead pan must have thought that his grilling was like speaking to a bunch of four year olds. Session end the Dow Jones Industrial average added 91 points to 10374, the nerds of NASDAQ added 22 to 2235 and the broader market S&P 500 was able to tack on 10.6 points to 1105 points.

The oil price last crossed the screen at 79.55 Dollars per barrel. The gold price was last at 1091 Dollars per fine ounce. Platinum, slightly better at 1509 Dollars per fine ounce. Copper, the price lower at 320 US cents per pound. The Rand is trading weaker at 7.79 to the US dollar, 10.52 to the Euro and 11.94 to the Pound Sterling.

Expect a worse start here, a lower commodity complex.

Sasha Naryshkine
sasha@vestact.com
www.twitter.com/sashanaryshkine
011 022 5440