3M tops Q1 estimates on cost cuts but flags trade tension hit to 2025 outlook

Local Market Commentary

The JSE Top 40 rose 0.56% to 82,722.3, while the All Share gained 0.48% to close at 89,911.9. South Africa's composite leading business cycle indicator fell 0.2% m/m in February, and the DA launched a legal challenge against the proposed VAT hike to 15.5%, set for 1 May. Meanwhile, Kropz plc, 90% owned by Motsepe’s African Rainbow Capital, applied to mine phosphate in the West Coast National Park, drawing criticism from WWF.

European Market Commentary

European markets closed modestly higher, with the STOXX 600 up 0.2% as financials and L'Oréal (+6.3%) lifted sentiment. L'Oréal beat Q1 sales forecasts, countering slower growth from LVMH’s Sephora. The ECB’s latest survey showed eurozone inflation may slightly exceed earlier forecasts but is expected to stabilise around 2%.

U.S. Market Commentary

U.S. markets rebounded as Q1 earnings and easing U.S.-China tensions boosted sentiment. Trump’s retreat from criticism of Fed Chair Powell further supported markets. Of the 82 S&P 500 firms reporting, 73% beat forecasts, though Q1 earnings growth is now seen at 8.1%, down from 12.2% initially. Volume totalled 15.21bn shares versus a 20-day average of 18.94bn.

Asia Market Commentary

Asia-Pacific markets followed Wall Street’s lead, rising on hopes of trade de-escalation. Singapore’s March inflation held at 0.9% y/y, below expectations, as the country heads into elections on 3 May. Shares in Tesla-linked EV stocks gained despite Tesla’s Q1 earnings miss.

Currency Market Commentary

The rand strengthened alongside gold on Tuesday but remains pressured by political discord within the GNU, especially regarding VAT policy. The dollar initially surged and then steadied as Trump withdrew his Powell criticism, and trade optimism boosted overall sentiment.

Commodity Market Commentary

Gold prices dropped nearly 2% as safe-haven demand eased after Trump toned down remarks on Powell and trade. Oil extended gains amid fresh U.S. sanctions on Iran, a draw in crude stocks, and a more dovish Fed tone.

Standard Bank Group Limited (SBK) +0.31%

Standard Bank Group Limited reported earnings attributable to ordinary shareholders of R10.9 billion for the three months ended 31 March 2025 (1Q25), reflecting a 10% year-on-year rise in headline earnings. Despite this growth, ordinary shareholders’ equity declined to R244.6 billion from R250.7 billion, mainly due to R12.6 billion in dividends declared and a R3.4 billion negative swing in the foreign currency translation reserve. Africa Regions continued to contribute over 40% of headline earnings, affirming the group’s portfolio strength and geographic diversification. Notable movements included a R1.3 billion increase in treasury shares. The group maintained its 2025 guidance amid geopolitical and macroeconomic uncertainty and remains well-capitalised and liquid, serving 20 million customers across its footprint. This quarterly disclosure, aligned with IFRS, was provided to ICBC but has not been reviewed by external auditors.

Capitec Bank Holdings Limited (CPI) 0.42%

Capitec Bank Holdings Limited reported a 32% increase in operating profit before tax to R17.74 billion for the year ended 28 February 2025, alongside a 30% rise in both headline earnings per share (11,912 cents) and earnings per share (11,911 cents). The board declared a final gross dividend of 4,425 cents per share, bringing the total dividend for the year to 6,510 cents—a 34% year-on-year increase, consistent with its 55% headline earnings payout policy. Net asset value rose 17% to R50.91 billion, reflecting robust earnings and capital discipline. With 116.1 million shares in issue, the final dividend equates to 3,540 cents per share after tax. These results highlight Capitec’s sustained shareholder value creation through earnings strength and prudent financial management.

Capital One Financial (COF) +3.05%

Capital One Financial reported higher first-quarter profit, with net income rising to $1.33 billion, or $3.45 per share, from $1.20 billion, or $3.13 per share, a year earlier, supported by a 7% increase in net interest income to $8.01 billion and a 4% rise in non-interest income to $1.99 billion. Despite a 4.6% uptick in net charge-offs to $2.74 billion, the company benefited from its strong credit card business amid weaker consumer spending. U.S. regulators also approved Capital One’s $35.3 billion acquisition of Discover Financial, set to close on 18 May, creating the largest U.S. credit card issuer by balances and the eighth-largest bank overall.

3M Company (MMM) +8.12%

3M Co beat Wall Street expectations with a first-quarter adjusted profit of $1.88 per share, above the $1.77 estimate, driven by cost-cutting efforts under new CEO Bill Brown’s restructuring plan, which helped lift adjusted operating income margin to 23.5%. Despite 2.5% sales growth in its safety and industrial segment and total net sales of $5.78 billion, the company warned of a potential $0.20–$0.40 per share hit to its 2025 adjusted profit forecast of $7.60–$7.90 due to rising global trade tensions and tariff-related costs, which could total $850 million annually before exemptions. 3M plans to mitigate these impacts by adjusting its global supply chain.

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