Alas, interim earnings are down at KAP (JSE: KAP)

The ramp-up of the new PG Bison line has impacted earnings

KAP has released a trading statement for the six months to December 2024. With the share price up roughly 26% in the past year, investors have been reaping the benefits of improved sentiment around South Africa. Here’s the catch though: that sentiment doesn’t last unless earnings catch up to the share price.

At KAP, this hasn’t happened, at least not in the interim period. HEPS has dropped by between 19% and 23%, so it should be in the range of 16.7 cents to 17.7 cents.

The company has laid the blame at the door of the PG Bison ramp-up, where the new line is not running at optimal levels just yet. That sounds to me like a demand problem to be honest, particularly as they talk about “making good progress on selling the additional volume” – so was it a production problem during ramp-up, or a sales problem? Seems like the latter to me.

KAP is a highly diversified group, so it’s also unlikely that the sole source of pressure was in PG Bison. We will have to wait until the release of results on 27 February to know for sure.

Pan African Resources continues to slide (JSE: PAN)

The market really isn’t impressed with the recent numbers

The Pan African Resources share price has fallen over 14% in the past week. To put that sell-off in context, it’s important to look at the share price over the past year as gold shone brightly:

Those who enjoy tactical entry points in a broader bull trend are probably paying attention now.

The reason for the market’s irritation is production for the six months to December 2024, which was 3.3% lower. There were some production issues during the period, yet Pan African Resources reckons that they can claw it back in the second half and still meet 2025 production guidance. Suddenly, that chart is looking even more interesting, isn’t it?

Naturally, improved production in the second half of the year is also expected to lead to a lower all-in sustaining cost per ounce for H2 relative to H1. Mining is unpredictable though, so there’s always risk of further operational issues (like the Eskom transformer failures that were suffered at Barberton Mines in the interim period).

They also expect to grow production in FY26, boosted by projects like the Mogale Tailings Retreatment operation and Tennant Consolidated Mining Group in Australia.

Here’s another reason why I am pulling the trigger on this chart and adding Pan African to my portfolio: the gold forward sale transaction expires at the end of February, which means that the company can enjoy the full benefit of current gold prices in the second half of the year.

PGM basket prices continue to haunt Northam Platinum (JSE: NPH)

There’s a substantial drop in interim earnings

Northam Platinum released a detailed trading update and trading statement dealing with the six months to December. Despite a 3.7% increase in equivalent refined metal from its own operations, there was a 2.5% decrease in refined metal produced due to planned maintenance.

When you combine this with a 3.5% drop in the 4E basket price (measured in ZAR) and a 7.7% increase in group unit cash costs per equivalent refined 4E ounce, there’s going to be a rough story to tell at headline earnings level. Indeed, HEPS is down by between 44.7% and 54.7%.

With operating profit margin down drastically from 16.1% to 7.5%, things need to improve in the sector or there’s going to be serious trouble. The mines are still profitable for now, but inflationary impacts on costs aren’t going away. The only way for things to get better is for the PGM prices to go up, with the mining houses doing all they can to manage costs and their balance sheets in the meantime.

Trellidor finally has reason to celebrate (JSE: TRL)

You won’t often see a share price jump 42% in a day

As share price charts go, Trellidor is one of the more incredible ones:

Stocks that are lightly traded and which show significant earnings volatility can end up having breathtaking one-day moves. The latest one is in the right direction at least, taking the stock 42% higher and back to where it was trading in mid-2023.

The reason? Simply, a jump in earnings. HEPS for the six months to December will be between 33% and 43% higher, coming in at between 28.53 cents and 30.67 cents. They attribute much of this to the Trellidor UK division, which says rather a lot about what’s changing in the UK. The Taylor and NMC divisions also improved.

Nibbles:

• South32 (JSE: S32) released the happy news that the Worsley Mine Development Project has received Federal environmental approval in Australia. This project gives access to bauxite to sustain production at Worsley Alumina, which will also support ongoing jobs in the region.

• Universal Partners (JSE: UPL) has almost no liquidity in its stock, so I’m not covering the results in detail on an otherwise busy day of news from companies that you can actually trade. I’ll just give it a passing mention that for the six months to December 2024, the net asset value per share decreased by 6.7% year-on-year. And yes, in case you’ve followed them closely, they still have a business unit that “reinvented the toilet” and yet is carried at a nominal investment value. Apparently, people are happy with their current toilets!

• BHP Group (JSE: BHP) has announced that its Chair, Ken MacKenzie, will retire at the end of March 2025 after serving since September 2016. That’s a solid innings! His replacement is Ross McEwan, who has been an independent non-executive director of the company since April 2024. His prior executive experience is mainly in the banking industry, which is interesting. That speaks directly to capital allocation skills and perhaps even future M&A?

• Brimstone (JSE: BRT) has released a trading statement. Normally, such a thing would be in the top section of Ghost Bites instead of the Nibbles, but the issue is that Brimstone’s trading statement is based on the movement in HEPS rather than in net asset value (NAV). This makes it quite useless really, as nobody should be using HEPS to assess performance at Brimstone. If for some reason you do though, HEPS is up by between 46% and 56% for the year ended December 2024. There are a million reasons why HEPS isn’t helpful here, not least of all because of the impact of Sea Harvest no longer being a subsidiary of Brimstone after the Terrasan Group deal. Brimstone’s share price is flat over 12 months, which shows you how much attention the market pays to HEPS at an investment holding company.

• As regular readers know, I generally ignore non-executive director appointments as they are rarely of great relevance to investors. From time to time, more experienced appointments are worth touching on. I think it deserves a mention that SA Corporate Real Estate (JSE: SAC) has appointed Janys Ann Finn to the board. As the ex-CFO of Redefine Properties and Rebosis Property Fund among others, she brings a ton of experience to the Audit and Risk Committee.