Petrobras Q1 Net Profit Soars 49% on One-Offs, Misses on Core Earnings and Revenue

Local Market Commentary

The Top 40 index rose 0.36% to 84,689.8 points, and the All Share index gained 0.34%, closing at 92,170.8 points. Key South African data releases this week include Q1 unemployment figures (due Tuesday) and March mining production (Thursday), with Oxford Economics forecasting GDP growth of just 1% in 2025. On the infrastructure front, rising Transnet pipeline tariffs are prompting fuel suppliers to shift towards road transport, as trucking offers a comparable cost alternative. Meanwhile, the U.S. granted refugee status to 59 white South Africans, drawing international attention and domestic criticism.

European Market Commentary

European shares began the week with positive momentum, as the U.S. and China agreed to temporarily reduce tariffs, offering relief to global markets impacted by the trade war. The U.S. will cut tariffs on Chinese imports from 145% to 30%, while Chinese tariffs on U.S. goods will drop from 125% to 10% for the next 90 days. The pan-European STOXX 600 index closed 1.2% higher, with gains across regional bourses, including Germany and the UK. Meanwhile, Norwegian Air's government-backed rescue loan was partially converted into a 6.37% stake in the airline. German commercial property prices rose 2.3% in Q1, marking a positive turnaround after consecutive declines.

U.S. Market Commentary

Wall Street's three major indexes surged on Monday, with the S&P 500 reaching its highest level since early March, driven by optimism over a U.S.-China agreement to temporarily reduce tariffs, easing concerns about the global trade war. The U.S. will cut tariffs on Chinese imports to 30% from 145%, while China will lower tariffs on U.S. goods to 10% from 125% for 90 days. The S&P 500, Nasdaq, and Dow all posted their largest single-day gains since April 9, with the S&P breaking above its 200-day moving average. As earnings season winds down, Walmart's results are due later this week. Additionally, U.S. President Donald Trump signed an executive order aimed at lowering drug prices, setting targets for pharmaceutical companies with potential further actions if progress isn't made.

Asia Market Commentary

Asia-Pacific markets were mixed on Tuesday following a strong rally on Wall Street after the U.S. and China agreed to a trade deal. Nissan Motor's shares rose by 5.95% following reports of a potential 20,000 job cut globally, doubling the previously stated figure. Meanwhile, the Bank of Japan's Deputy Governor, Shinichi Uchida, indicated the central bank's commitment to raising interest rates if economic and price conditions improve, despite uncertainty over U.S. tariffs. In April, Japanese investors significantly increased their overseas equity purchases, reaching a net ¥3.27 trillion ($22.37 billion), the highest in nearly two decades, while pulling funds from foreign bonds.

Commodity Market Commentary

Gold prices remained near a one-week low on Tuesday, as the U.S.-China agreement to temporarily halt tariffs boosted risk appetite and reduced gold's safe-haven appeal. Meanwhile, oil prices eased from a two-week high, driven by concerns over rising supplies despite earlier optimism from the U.S.-China trade truce. OPEC has increased oil output more than expected since April, with May output projected to rise by 411,000 barrels per day.

Currency Market Commentary

The South African rand weakened on Monday, pressured by a stronger dollar and lower gold prices following the U.S.-China tariff deal. The pound dropped against the dollar but strengthened against the euro and yen, benefiting from the U.S.-China trade truce. The dollar maintained strong gains on Tuesday as investors welcomed the tariff agreement, easing concerns over a global recession due to the trade war between the U.S. and China.

 Tiger Brands Limited (TBS) +2.20%

Tiger Brands anticipates a strong recovery for H1 2025, supported by disciplined execution of its turnaround strategy and continued portfolio optimisation. The Group expects earnings per share (EPS) from total operations to increase by 45–55% and headline earnings per share (HEPS) by 15–25% year-on-year. From continuing operations, EPS is expected to rise by 70–80% and HEPS by 30–40%, underscoring operational momentum and portfolio streamlining following the disposal of Baby Wellbeing and the Carozzi equity sale. Additionally, the company has made a key legal advancement by supporting a targeted settlement offer to certain claimants in the listeriosis class action, with funding secured through its lead insurer. Interim results will be released on 28 May 2025.

MTN Group Limited (MTN) +0.52%

MTN Group reported strong operational momentum for Q1 2025, with group service revenue increasing by 10.4% (19.8%* in constant currency), led by solid performance in Nigeria and Ghana. Data and fintech segments drove growth, with data revenue up 17.9% (28.7%) and fintech revenue rising 17.2% (25.2%), reflecting successful strategic delivery. Group EBITDA margin expanded by 5.3 percentage points* to 44.1%, supported by operational leverage. The Group reached 296.8 million subscribers, with active data users and MoMo customers growing 9.1% and 1.1% respectively. MTN continues to progress its fintech separation and LEO partnerships while maintaining a resilient balance sheet.

Lewis Group Limited (LEW) +14.93%

Lewis Group forecasts headline earnings per share (HEPS) for FY25 to increase by 55–65% (to 1 433–1 525 cps), while earnings per share (EPS) are expected to grow by 75–85% (to 1 411–1 492 cps), compared to FY24’s R500.4 million base. This strong performance is attributed to growth in credit sales, margin expansion, and improved debtor quality, with lower associated costs despite a larger debtors’ book. Operating costs were effectively managed, and collection rates remained solid. Final audited results are due around 29 May 2025.

Boxer Retail (BOX) -3.87%

Following its successful JSE debut on 28 November, Boxer Retail delivered a strong FY25 performance. The group opened 48 net new stores, expanding its network to 525 outlets. Like-for-like sales rose 5.6% (52-week basis), and trading profit increased by 9.9% (17.0% excluding non-cash gains related to the Pick n Pay guarantee derecognition). Boxer exceeded its 5% margin guidance with a trading margin of 5.5% (5.4% on a 52-week basis). Net debt (ex-leases) was contained at R180 million (0.1x Net Debt to EBITDA, pre-IFRS 16), and ROIC reached a sector-leading 25.5% (73.6% ex-IFRS 16). Employment rose by 2 900, bringing total headcount to 31 906.

Calgro M3 Holdings (CGR) -10.71%

Calgro M3 reported a mixed FY25 performance, with EPS down 10.14% to 171.72 cents and HEPS decreasing by 9.31% to 171.36 cents, driven by a 32.69% decline in revenue to R868.9 million. However, gross margin improved to 29.43%, and NAV per share grew by 12.07% to R14.86. The Group’s cash balance rose by 26.18% to R154.7 million, while net debt to equity remained stable at 0.65. Operationally, 1 543 housing opportunities were under construction, and the Group declared a final dividend of 8.63703 cents, marginally below the prior year’s payout.

Petroleo Brasileiro SA (PETR4) +2.39%

Petrobras reported a 48.6% year-on-year increase in net profit for Q1 2025, reaching 35.2 billion reais ($6.21 billion), boosted by non-recurring events. Excluding these one-off factors, net profit would have fallen 12.1%, to around 23.6 billion reais. Adjusted EBITDA rose 1.7% to 61 billion reais, slightly below analyst expectations of 62.9 billion reais. The company also announced a dividend distribution of 11.72 billion reais ($2.1 billion), or 0.91 reais per share. Capital expenditure increased to $4.1 billion, up from $3 billion the previous year. Net revenue grew 4.6% to 123.1 billion reais, below the expected 124.9 billion reais.

Nissan Motor Company Limited (7201) +0.70%

Nissan Motor will cut over 10,000 jobs globally, bringing total layoffs to approximately 20,000, or 15% of its workforce. The company is aiming to streamline operations after weak sales in key markets, notably China and the U.S., and is facing a projected record net loss of ¥700 billion to ¥750 billion ($4.74 billion–$5.08 billion) for the year due to impairment charges. Nissan's failure to capitalise on the hybrid and electric vehicle markets, particularly in the U.S. and China, has contributed to its struggles. As part of its restructuring, Nissan plans to close a plant in Thailand by June and discontinue plans for a $1.1 billion EV battery factory in Japan.

Tata Steel Limited (500470) +6.16%

Tata Steel, India's second-largest steelmaker, reported a larger-than-expected quarterly profit for the period ending March 31, with net profit more than doubling to 13.01 billion rupees ($153.32 million), surpassing analysts' estimates of 10.63 billion rupees. The profit growth was driven by a reduction in input costs, with total expenses falling 4.1% to 541.68 billion rupees, and a significant 18.5% drop in the cost of materials consumed. However, total revenue from operations declined 4.2% to 562.18 billion rupees, slightly missing analysts' expectations. The results come after India imposed a 12% temporary safeguard duty on certain steel imports to protect domestic producers.

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