Money and Markets

Last week was horrifying for big SA businesses and their bosses — here’s how the losses are piling up

Business Insider SA
Photo: Elvira Wood
  • The share prices of a number of large companies went into freefall last week.
  • Some top CEOs also lost their jobs in a wild week for some of SA's largest businesses.
  • So far, 2019 has been disastrous for investors in most of South Africa’s largest listed companies. 
  • Netcare and Sappi have declined by more than 30%. 
  • For more, go to Business Insider SA.

One of the wildest weeks in recent memory has wreaked havoc on investment portfolios and claimed the scalps of some of South Africa’s top CEOs.

Here were some of the biggest shockers from last week:

Old Mutual’s CEO was suspended amid a fight over his side business

Peter Moyo

In the 15 minutes following the announcement that Peter Moyo was suspended, almost R5 billion was wiped off Old Mutual’s value on Friday morning.  The share price later recovered, but still ended down more than 2% after a weak trading update.

It seems that Moyo's interest in an investment company called NMT was the sticking point. Old Mutual invested almost R300 million in NMT. The Old Mutual board and Moyo "disagreed materially on how the conflict of interest has been managed, resulting in a breakdown in the required mutual trust and confidence”.

Eskom’s CEO resigned unexpectedly

Eskom CEO Phakamani Hadebe during the state entity
Eskom CEO Phakamani Hadebe during the state entity's interim results announcement at Megawatt Park, Johannesburg, in January (Gallo mages / Felix Dlangamandla)

Phakamani Hadebe said the job was taking a toll on his health.

According to Rapport newspaper, Hadebe is believed to have collapsed at work on two separate occasions and had to be taken to hospital by ambulance. A reliable source within Eskom claimed that Hadebe twice attempted to hand in his resignation, but was persuaded to stay.

Sasol went into freefall

Its share dropped 17% after it (again) raised the expected cost of its American Lake Charles Chemicals Project. The project will now cost $12.9 billion – 45% more than its original projections.

“That is not even the worst part,” says JC Louw, CEO of the investment information and trading platform Sharenet. Sasol also cut its forecast return to a range on the project of 6.0% - 6.5%, yet the company's weighted average cost of capital is 8.0%.” I am no expert in managing a beast like Sasol, but if a project is costing you 8% per year to fund and it only returns 6%, isn't that a recipe for loss?”

Netcare’s CEO had to dump R200 million in shares

Richard Friedland sold almost all of his own shares in the company.

The company says he was "obliged" to sell the shares to settle finance and other costs. It is common for executives to put up their shares as security in exchange for bank loans - and when Netcare's share price started falling, he had to sell to cover the loans. Netcare's share price has halved over the past four years. 

“A SENS announcement emphasised that Friedland remains committed to the success of the company and will stay on as CEO, but we can't help but notice that he is now R200 million less committed,” says Louw.

Comair’s CEO unexpectedly resigned

Erik Venter

Erik Venter, who has been with the company for 23 years, resigned “to pursue his own interests”.

Grand Parade’s chair quit

Hassen Adams, chair of Grand Parade Investments. Photo: Lerato Maduna

The executive chair and founder of Grand Parade Investments resigned from his executive position. Hassen Adams sold R60 million in shares before resigning. Small shareholders have been trying for months to get Adams out. 

Massmart lost a fifth of its value

The owner of Makro, Game and Builders Warehouse tanked after warning that its earnings for the current six months will be at least 50% lower than last year. Sales growth at all of its retail stores are sluggish, and were below 4% for the first twenty weeks of its new financial year.

Its CEO recently resigned, and will now be replaced by a Walmart fixer, 52-year old Mitch Slape, who has been with the US giant for almost a quarter of a century. Walmart owns a majority stake in Massmart.

Tiger Brands slumped 11%

The food producer started bleeding after releasing its results, which showed a 2% decline in its revenue. Its earnings fell 12% due to lower exports and the continued costs of a deadly outbreak of listeriosis, which has resulted in a class action suit filed by victims.

So far 2019 has been disastrous for investors in most of South Africa’s largest listed companies.

TimBukOnea financial software company for the investment market, has compiled a list of the worst-performing shares since the start of the year:

Sappi -32%

Its share price has almost halved from its peak over the past year.  The company is under pressure amid weak demand for its products in Europe and increased spending on new factories.

Netcare -30%

The share took a beating after its latest results showed that hospital occupancy and profitability are on the decrease.

Aspen -26%

The pharmaceutical company is down two-thirds from its highest point over the past year, as investors worry about its debt burden, which has reached R53.5 billion and is larger than its market value.

Mr Price -23%, Woolworths -19% and Shoprite -14%

The tough retail climate has triggered a sharp sell-off in most retailers.

Tiger Brands -20%                  

The share is now almost 40% below its highest point over the past year.

Sasol -17%           

Sasol is also almost 40% below its peak over the past year. 

Vodacom -13%

The share was sold off after its revenue came under pressure. By comparison, its competitor MTN is up 12.5% so far this year. 

Some of the only winners were in the resource sector, including Angloplat (22%) and Gold Fields (+13%).

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