SAP jumps on strong Q1 profits and AI-Led cloud demand

Local Market Commentary
The Top 40 and All Share indices posted marginal declines, edging down 0.13% and 0.07% respectively, to close at 82,614.2 and 89,846.8 points, amid heightened political resistance to the Treasury's shelved VAT hike proposal. Notably, March inflation dipped to 2.7%—its lowest level since mid-2020—driven by softer fuel and education price increases, falling below SARB’s target range and consensus forecasts. Meanwhile, Aspen Pharmacare shares plunged over 30% following a profit warning linked to a material contractual dispute disclosed after Tuesday’s market close.

European Market Commentary
European equities advanced strongly, with the STOXX 600 up 1.8% and Germany’s DAX outperforming at 3.1%, buoyed by earnings optimism and signs of reduced U.S.-China trade friction. SAP’s earnings beat was a key sentiment driver, alongside Eurostat data showing EU exports to the U.S. surged 22.4% year-on-year in February—the fastest pace in over a year—totalling €51.8 billion. However, regional growth concerns linger, as the eurozone composite PMI revealed stagnant business conditions with continued manufacturing weakness and an unexpected contraction in services.

U.S. Market Commentary
Wall Street posted moderate gains as investor sentiment improved on signs of potential progress in U.S.-China trade talks and renewed political support for the Fed’s independence. President Trump’s comments about not intending to dismiss Fed Chair Powell helped ease concerns about central bank autonomy, while Treasury Secretary Bessent’s remarks on unsustainable tariffs provided a further boost. Tech and consumer discretionary stocks led gains within the S&P 500, while defensives like consumer staples and energy underperformed. Despite the rally, economic data hinted at underlying challenges, with S&P Global’s flash PMI showing a slowdown in business activity and evidence of price pressures mounting.

Asia Market Commentary
Asia-Pacific markets traded mixed on Thursday, reflecting a blend of optimism from Wall Street gains and regional growth concerns. Investor sentiment was bolstered by hopes of easing U.S.-China trade tensions, but macroeconomic headwinds persisted, particularly in South Korea, where GDP contracted 0.1% year-on-year in Q1—missing forecasts and marking the first y/y decline since Q4 2020. The contraction was driven primarily by a 12.4% slump in the construction sector, signalling deepening fragility in fixed investment and infrastructure-related demand. On a quarterly basis, GDP shrank by 0.2%, reversing modest growth in Q4 2024 and raising concerns about the sustainability of the country’s recovery amid global volatility.

Commodity Market Commentary
Commodities traded with caution, reflecting shifting sentiment on global risk and supply dynamics. Gold prices fell below $3,300 after briefly reaching a record $3,500.05 earlier in the week, as investors rotated out of safe havens amid a more constructive trade dialogue. Oil prices inched higher on Thursday after a nearly 2% drop the previous day, as markets digested news that several OPEC+ members are pushing for accelerated output increases in June. These internal OPEC+ negotiations highlight underlying tensions over production quotas and compliance, which have historically complicated consensus building. Meanwhile, ongoing U.S.-Iran nuclear discussions added a layer of geopolitical risk, contributing to market volatility in energy pricing.

Currency Market Commentary
Currency markets reflected mixed sentiment, with the rand weakening following a sharper-than-expected inflation drop that could limit SARB’s policy flexibility. March CPI fell to 2.7%—well below the central bank’s target floor—reinforcing dovish expectations. The U.S. dollar stabilised after recovering sharply on the back of a more conciliatory stance from the Trump administration on Fed policy and trade tariffs. The euro held near $1.1338 after retreating from recent highs, while sterling rebounded from intraday losses despite a significant contraction in UK business activity.

Capitec Bank Holdings Limited (CPI) +7.18%
For the year ended 28 February 2025, Capitec delivered a 32% increase in operating profit before tax to R17.74 billion, with headline EPS rising 30% to 11 912 cents, supported by strong operational momentum. EPS mirrored this growth at 11 911 cents. A final gross dividend of 4 425 cents per share was declared on 23 April, bringing the full-year dividend to 6 510 cents—up 34% and consistent with the 55% HEPS payout ratio. NAV increased 17% to R50.91 billion, underpinned by earnings strength and balance sheet resilience. With 116.1 million shares in issue, the net dividend equates to 3 540 cents per share post-tax. These results affirm Capitec’s disciplined growth strategy and capacity to deliver sustained shareholder returns.

Afrimat Limited (AFT) -3.98%
Afrimat anticipates an 85%–90% decline in FY2025 EPS due to weaker iron ore prices, reduced AMSA volumes, and export delays linked to border closures. HEPS is expected to fall within the same range. Nonetheless, Construction Materials performed steadily, Industrial Minerals recovered, and Cement operations stabilised post-Lafarge integration. Early traction in rare earths and phosphates adds longer-term potential. Despite current commodity headwinds, structural gains at Nkomati and a sharpened strategic focus position Afrimat for a rebound in FY2026.

Quilter plc (QLT) +0.61%
Quilter posted strong Q1 2025 results, with core net inflows surging 181% y/y to £2.28 billion—equating to 8% of opening AuMA on an annualised basis—despite total AuMA remaining flat at £119.6 billion due to market weakness and currency effects. The Affluent segment led performance with a 42% jump in gross inflows and 179% rise in net inflows, while High Net Worth maintained steady growth. Platform net inflows hit a record £2.29 billion, buoyed by strong IFA contributions. Persistency held at 91%, and adviser productivity improved, reinforcing Quilter’s commercial momentum.

SAP SE (SAP) +10.62%
Shares in SAP rose on Wednesday after the company reported better-than-expected first-quarter profits, driven by cost reductions and strong demand for its cloud-based offerings, particularly those leveraging artificial intelligence. SAP’s adjusted operating profit for Q1 was €2.5 billion ($2.86 billion), surpassing analysts' forecasts of €2.22 billion. The company confirmed its full-year cloud revenue target range of €21.6 billion ($24.6 billion) to €21.9 billion, while maintaining solid performance in key metrics such as free cash flow, cloud order backlog, and operating profit. SAP is also undergoing a cost-cutting programme, with up to 10,000 jobs under review as it positions itself for an AI-driven future, with restructuring costs estimated at €3 billion. CEO Christian Klein noted that despite global uncertainties, SAP has yet to see reluctance from customers investing in its software solutions.

International Business Machines Corp (IBM) +1.90%
International Business Machines (IBM) saw its shares drop over 6% after hours, as the Trump administration's cost-cutting measures led to the shelving of 15 government contracts worth approximately $100 million, a setback overshadowing the company’s positive revenue forecast. Despite this, the contracts represented less than 1% of the order backlog in IBM’s consulting unit. The company raised its revenue forecast for the June quarter to between $16.40 billion and $16.75 billion, surpassing analysts' expectations of $16.33 billion. In Q1, IBM reported a 1% increase in revenue to $14.5 billion, with consulting revenue falling 2% to $5.1 billion. Adjusted earnings of $1.60 per share exceeded the $1.40 expected by analysts, driven by growth in its high-margin software segment. Additionally, IBM’s AI Book of Business grew by $1 billion to more than $6 billion in total bookings and sales.

Boeing Company (BA) +6.06%
Boeing's CEO, Kelly Ortberg, assured investors that the company is recovering from the U.S.-China trade war after reporting a smaller-than-expected loss and higher jet output, boosting shares by 6%. Despite trade tensions affecting deliveries to China, Boeing is redirecting jets to other airlines and is in talks with the U.S. administration about potential retaliatory tariffs from Europe. The company expects to recover the 10% U.S. tariff on imported parts. Boeing aims for positive free cash flow in the second half of the year and sold its Digital Aviation Solutions business for $10.55 billion. Its defense unit returned to profitability, and it reported an improved adjusted loss of $0.49 per share, better than analysts' expectations.

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