Deere beats Q2 forecasts on cost control, flags Trump-era tariffs

Local Market Commentary

The Top 40 Index dipped 0.14% to close at 84,795.9 points, while the All Share Index fell 0.15% to 92,338.4 points. Mining output contracted 2.8% year-on-year in March, a moderation from February’s revised 9.7% decline, according to official data. Market attention turns to next week’s revised budget speech by Finance Minister Enoch Godongwana, coinciding with President Cyril Ramaphosa’s meeting with former U.S. President Donald Trump. Health Minister Aaron Motsoaledi confirmed no new funding has been secured following U.S. cuts to PEPFAR, which previously covered 17% of South Africa’s HIV budget, but denied significant impact on the HIV programme. Separately, the Land & Agricultural Development Bank of South Africa is negotiating a potential $1 billion funding package with development finance institutions, seeking Treasury support to aid its recovery from a 2018 default.

European Market Commentary

European shares rebounded from early losses to close higher on Thursday, led by gains in industrial stocks, with the STOXX 600 index rising 0.6% and Germany’s DAX up 0.7%. Corporate earnings continued to draw investor attention amid mixed economic signals. Geopolitically, Russian President Vladimir Putin declined a face-to-face meeting with Ukrainian President Zelenskiy in Turkey, dampening hopes for a peace breakthrough. In the UK, official data showed first-quarter productivity growth slowed to 0.2% quarter-on-quarter, down from 0.7% in Q4 2024 and weaker year-on-year, though the Office for National Statistics cautioned that low Labour Force Survey response rates may reduce data reliability.

U.S. Market Commentary

Wall Street closed mixed on Thursday, buoyed by Cisco Systems’ strong forecast, while UnitedHealth shares fell sharply amid reports of a criminal investigation. The S&P 500 has rebounded from April’s selloff driven by U.S.–China trade tensions, reflecting investor optimism over potential tariff rollbacks. Meanwhile, the Financial Times reported that U.S. regulators are preparing significant reductions to bank capital requirements, specifically the supplementary leverage ratio, expected in the coming months. On the defence front, President Trump announced plans to develop the F-55 twin-engine warplane and upgrade the F-22 Raptor to the F-22 Super, alongside securing major aerospace contracts, including Qatar’s order of 160 Boeing jets.

Asia Market Commentary

Asia-Pacific markets showed mixed performance on Friday as investors digested Japan’s preliminary Q1 GDP data, which revealed a 0.2% quarter-on-quarter contraction—steeper than the 0.1% decline forecast by economists. On an annualized basis, Japan’s economy shrank 0.7% in the first quarter, exceeding expectations of a 0.2% drop, adding caution ahead of further regional economic releases.

Commodity Market Commentary

Gold prices eased on Friday, set for their largest weekly drop in six months amid a stronger US dollar and easing trade war tensions, reducing gold’s safe-haven appeal. Conversely, oil prices rose following a prior sharp decline, buoyed by optimism over US-China trade talks despite lingering uncertainties over a potential Iran nuclear deal. The International Energy Agency raised its global supply forecast for 2025 by 380,000 barrels per day, citing OPEC+ output restoration, supporting a more balanced market outlook.

Currency Market Commentary

South Africa’s rand firmed on Thursday following comments from the deputy finance minister suggesting a potential lowering of the inflation target, boosting investor sentiment. The British pound gained against the US dollar after stronger-than-expected economic growth data raised expectations for fewer Bank of England interest rate cuts. Meanwhile, the US dollar weakened alongside Treasury yields on Friday, as softer-than-anticipated US economic data reinforced market expectations for additional Federal Reserve rate reductions. Fed Chair Jerome Powell’s recent remarks signalled a reassessment of monetary policy’s approach to jobs and inflation, adding to market caution.

Karooooo Limited (KRO) +3.73%

Karooooo delivered a resilient FY2025, with Cartrack subscribers rising 17% year-on-year to over 2.3 million and subscription revenue increasing 15% to ZAR4.1 billion. Operating profit grew 26% to ZAR1.31 billion, while adjusted EPS expanded 33% to ZAR31.67, reflecting effective margin management and operational execution. Cartrack’s SaaS ARR increased 17% to ZAR4.4 billion, complemented by a 33% rise in Logistics’ DaaS revenue to ZAR420 million. Despite elevated investments in customer acquisition and infrastructure, the group closed the year with a healthy cash balance of ZAR838 million. FY2026 guidance anticipates Cartrack subscription revenue growth of 16–21% and EPS between ZAR32.50 and ZAR35.50, supported by strategic distribution expansion and platform adoption, although upfront investments may temper margin expansion in the short term.

Barloworld Limited (BAW) +0.49%

Barloworld issued a trading statement indicating an anticipated decline of approximately 19% to 23% in both basic EPS and HEPS for the six months ended 31 March 2025, relative to the prior period. EPS is forecast between 393.0 and 413.0 cents (H1 2024: 511.7 cents) and HEPS between 411.5 and 431.5 cents (H1 2024: 532.2 cents). The anticipated decrease is attributed to material changes in market conditions, with full interim results scheduled for release on or about 26 May 2025.

Sanlam Limited (SLM) +1.36%

Sanlam reported robust operational growth in Q1 2025, with net result from financial services and cash NRFFS rising 15% (18% in constant currency), and net operational earnings increasing 22% (26% in constant currency). Group new business volumes expanded 15%, while life insurance new business volume and value rose 4% on a normalised basis. Despite currency headwinds in Egypt and Nigeria, earnings impact was limited. Discretionary capital improved to R4.7 billion, rising to ~R9.7 billion after post-period transactions, with R5 billion allocated for pending Indian acquisitions. Strategic highlights included Allianz’s increased stake in SanlamAllianz to 49%, integration progress on Assupol, and advancements in partnerships with Shriram and Ninety One. The group maintains a strong solvency ratio and elevated capital buffers amid global market uncertainty.

Afrimat Limited (AFT) -3.40%

Afrimat reported a 36.7% increase in group revenue to R8.3 billion year-on-year, reflecting solid top-line momentum. However, headline earnings per share stood at 72.3 cents, indicating earnings margin pressure. Operating profit was R477.7 million, with the board declaring a final dividend of 15.0 cents per share. Net asset value per share increased to 2 862 cents, underscoring balance sheet resilience.

Equites Property Fund Limited (EQU) -1.29%

Equites, the JSE’s only specialist logistics REIT, reported a strong FY25 performance, driven by a focused portfolio of premium logistics assets with long leases and high ESG standards. South African portfolio valuations rose 6.0% like-for-like, supported by 5.9% rental growth and a weighted average lease expiry (WALE) of 14.1 years with no vacancies. The UK portfolio achieved rental uplifts between 19% and 69% on reviewed leases, with a WALE of 13.1 years and minimal vacancy of 1.5%. Financial highlights include a 2.1% increase in DPS to 133.92 cents (100% payout ratio), gross property revenue growth of 71.4% to R4.26 billion, disposals of R2.4 billion, and a loan-to-value ratio of 36.0%. Six new power purchase agreements were signed for FY26. The Board projects DPS growth of 5% to 7% for FY26, supported by large-scale development completions and stable operational conditions.

Deere & Company (DE) +3.78%

Deere & Co reported stronger-than-expected Q2 results, boosted by effective cost controls and inventory management, despite lowering the lower end of its annual profit forecast. Shares rose 5% in early trading as farmers’ preference for renting over purchasing machinery amid high interest rates and weaker crop prices weighed on sales of major equipment like tractors and combines. The company flagged over $500 million in tariff-related costs for 2025, driven by U.S. trade policies under President Trump, while signalling a cautious approach to ongoing uncertainties. CEO John May reaffirmed Deere’s commitment to investing $20 billion in the U.S. over the next decade.

Alibaba Group Holding Limited (9988) -1.15%

Alibaba reported fiscal Q4 revenue of 236.45 billion yuan, marginally below the 237.24 billion yuan consensus, while adjusted earnings per ADS came in at 12.52 yuan versus the expected 12.94 yuan. The group continues to navigate persistent economic softness in China and tariff-related uncertainties by refining its consumer engagement strategies. Its international commerce division (AIDC), including AliExpress, grew revenue by 22%, below the 26.4% forecast, while the Cloud Intelligence Unit expanded 18% to 30.13 billion yuan, demonstrating ongoing growth in cloud services despite broader market challenges.

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