NXP Semi Shares Drop After Revenue Forecast Miss

LOCAL MARKET COMMENTARY

On the Johannesburg Stock Exchange, the blue-chip Top 40 index and the All Share index closed 0.75% and 0.71% higher, respectively, ending Monday at 73,476 and 80,492 points. South Africa's June inflation figures, due on Wednesday, may provide insights into the country's interest rate outlook. Sasol's energy business increased coal export sales volumes by 5% for the financial year ending 30 June 2024, due to improved operations at its Thubelisha colliery and better performance at Transnet Freight Rail, boosting its share price by over 5% to R143.91 in mid-morning trade on Monday. Retailer Mr Price reported a 4.6% increase in first-quarter retail sales, reaching R8.5 billion. Mining giant Anglo American Plc is scaling down its trading operations as part of a restructuring effort following a bid from rival BHP Group earlier this year.

EUROPEAN MARKET COMMENTARY

European shares closed higher on Monday, recovering some of last week's steep losses with technology and financials leading the gains. The pan-European STOXX 600 index ended a five-day losing streak, a sequence last seen in October 2023. Most sectoral indexes closed higher. ECB policymaker Peter Kazimir suggested the possibility of two more interest rate cuts by the end of the year, contingent on supportive data. However, Ryanair bucked the trend, plummeting 17.2% to the bottom of the STOXX 600 index after reporting a nearly 50% drop in quarterly profits due to a 15% decrease in ticket prices compared to the same period last year.

US MARKET COMMENTARY

Wall Street's main indexes rose on Monday as investors returned to big tech stocks, helping the S&P 500 and Nasdaq recover from their worst weekly losses since April. The Dow also ended its two-day losing streak after hitting a record high last week. President Biden's decision not to run for re-election adds uncertainty, with potential impacts on market bets related to fiscal and inflationary pressures under a possible Trump victory. However, some analysts believe the market could benefit from the increased likelihood of a divided government in the next administration. Meanwhile, traders are also anxious about upcoming earnings reports from major companies like Alphabet and Tesla this week.

ASIA MARKET COMMENTARY

Asia-Pacific markets traded mixed this morning. China surprised markets with interest rate cuts on Monday, raising concerns over the economic outlook following softer-than-expected growth figures last week, which pressured commodities. South Korea’s Kospi rose as the producer price index increased by 2.5% year-on-year in June, compared to a 2.3% rise in May. Japan’s Nikkei 225 also climbed higher. India is set to unveil its first budget under Prime Minister Narendra Modi’s third term later today. Traders in Asia are also keeping an eye on Singapore’s June inflation data, with economists expecting a 2.7% year-on-year increase in the consumer price index, down from a 3.1% rise in May.

COMMODITY MARKET COMMENTARY

Gold prices held steady this morning as investors awaited U.S. economic data for hints on the Federal Reserve's interest rate cut timeline. Meanwhile, oil prices slipped for a third consecutive session as concerns about increasing oil supplies and weak demand overshadowed any impact from the U.S. presidential campaign developments.

CURRENCY MARKET COMMENTARY

The South African rand remained stable on Monday as investors awaited upcoming inflation data for clues about the country's future interest rate path. The U.S. dollar edged slightly higher on Monday in quiet trading as investors processed President Joe Biden's decision to end his re-election campaign, a move that could add more volatility to the currency market.

Anglo American Platinum Limited (AMS) +3.09%

Anglo American Platinum's 2024 interim results highlight several key achievements. The company implemented stringent safety measures after two fatalities. Refined PGM production increased by 5% to 1.78 million ounces, while metal-in-concentrate production fell by 5% to 1.76 million ounces. Sales volumes rose by 9% due to inventory drawdown. EBITDA was R12.3 billion, down 8% from the previous period, despite a 24% decline in PGM dollar basket prices, inflation, and restructuring costs, partially offset by cost reductions and higher sales. The company is on track to meet its R10 billion capital expenditure and cost-saving target for 2024, with R4.7 billion in savings achieved in the first half. They achieved an all-in sustaining cost (AISC) of $957 per 3E ounce, surpassing the 2024 target of below $1,050. Restructuring is progressing, with the Mortimer Smelter on care and maintenance from April 2024. The company holds a strong net cash position of R14.5 billion and declared an interim dividend of R2.6 billion (R9.75 per share), which is 40% of headline earnings, aligning with their capital allocation framework.

Mr Price Group Limited (MRP) +2.80%

In the first quarter of the financial year ending 29 March 2025, the group achieved retail sales growth ahead of the market, gaining 90 basis points in market share and improving gross profit margins. Group retail sales grew by 4.6% to R8.5 billion, outpacing the total comparable market's decline of 0.2%. The group has gained market share for 11 consecutive months, adding over R1.1 billion in market share on a 12-month rolling basis.

Despite a subdued trading environment in April and May 2024, with retail sales up by only 0.9% compared to the market's decline of 4.6%, the group saw a significant acceleration in June, with retail sales growth of 12.7% versus the market's 10.3% growth. Sales trends were consistent across all trading segments, and gross margins improved in every division due to fewer markdowns and more full-priced merchandise sales. Additionally, the group's three recent acquisitions reported the highest sales growth in the business.

Mpact Limited (MPT) -2.74%

Group revenue from continuing operations is expected to decline by about 1% compared to the previous year (June 2023: R6,240 million), with an 11% increase in the Plastics business offset by a 3% decrease in the Paper business. Earnings before interest, tax, depreciation, and amortization (EBITDA) are projected to decrease by approximately 8% (June 2023: R797 million) and underlying operating profit by about 20% (June 2023: R531 million), mainly due to the under-recovery of fixed costs and higher depreciation from major projects completed at the end of 2023.

Net finance costs are expected to rise to around R150 million (June 2023: R132 million) due to increased average net debt, which grew to approximately R3.2 billion (December 2023: R2,665 million) primarily due to the Mkhondo paper mill upgrade and working capital cash outflows. Despite this, Mpact remains well within its bank covenants. The effective tax rate for continuing operations is expected to be around 29% due to the allocation of income tax expense from discontinued operations to continued operations, while the effective tax rate for total operations is expected to align with the statutory rate of 27%.

NXP Semiconductors NV (NXPI) +5.39%

NXP Semiconductors forecast third-quarter revenue below analysts' estimates due to sluggish demand from automotive customers and rising geopolitical risks, causing its shares to drop about 8% in extended trading. The company experienced its steepest quarterly revenue decline in four years in the second quarter, with automotive sales plummeting by 7% to $1.73 billion. Total revenue of $3.13 billion met expectations, but the projected third-quarter revenue range of $3.15 billion to $3.35 billion fell short of the $3.36 billion estimate. While the automotive segment struggled, the mobile segment saw a 21% revenue increase to $345 million due to AI-driven demand from the smartphone industry. NXP's expected adjusted earnings per share for the third quarter, with a midpoint of $3.42, also missed the $3.61 estimate. To diversify its manufacturing base, NXP invested $1.6 billion in a joint venture with TSMC-backed Vanguard to produce silicon wafers in Singapore.

Nucor Corporation (NUE) +0.52%

Nucor Corp beat quarterly earnings estimates on Monday as increased volumes in the steel products segment helped offset lower domestic steel prices. The steel products segment, which makes components like joists, decks, tubes, and fasteners for construction, showed strength. However, Nucor expects lower prices to continue affecting earnings, predicting a weaker third quarter. The company reported an adjusted profit of $2.68 per share, surpassing the $2.35 per share expected by analysts. Despite this, net sales fell 15.1% from last year, and profit per share dropped nearly 54%. Total revenue for the quarter ended June 29 was $8.1 billion, beating the $7.69 billion estimate. The oversupply of steel from domestic production and imports led to lower average steel pricing and caused distributors to limit their purchases.

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