Boeing Warns of $4 Billion Q4 Loss Amid Strikes, Supply Chain Issues, and Charges

LOCAL MARKET COMMENTARY

The Top 40 index declined 0.83% to 75,640.2 points, while the All Share index closed 0.84% lower at 83,944.1 points. South Africa's mining sector achieved a record low of 42 fatalities in 2024, a 24% improvement from 2023, though these figures exclude deaths linked to illegal mining. Mines Minister Gwede Mantashe reaffirmed that illegal mining is a criminal matter outside his department's purview. Meanwhile, the South African Reserve Bank is anticipated to lower the repo rate by 25 basis points to 7.50% next week, with an additional cut expected in March. However, the final rate reduction for this cycle is projected to occur in Q3 2025. On the legislative front, President Cyril Ramaphosa signed the Expropriation Act into law, enabling land expropriation for public interest purposes with equitable compensation, aligning with constitutional principles.

EUROPEAN MARKET COMMENTARY

European markets ended higher, supported by positive sentiment at the World Economic Forum. The STOXX 600 gained 0.4% to 530.34 points, marking its seventh consecutive day of growth. Eurozone consumer confidence improved marginally, rising to -14.2 in January from -14.5 in December, consistent with expectations. In the UK, consumer confidence declined sharply, hitting its lowest level in over a year, with GfK’s index falling to -22 from -17, reflecting economic headwinds.

US MARKET COMMENTARY

The S&P 500 reached a record high, driven by gains across all 11 sectors, with healthcare and industrials leading at 1.35% and 0.96%, respectively. President Donald Trump’s remarks at Davos, advocating for lower oil prices and interest rates, added to market activity. Weekly jobless claims were slightly above expectations at 223,000, signalling a stable labor market. Canadian retail sales remained flat in November, though a 1.6% increase is anticipated for December. Mexico's inflation slowed to its lowest in nearly four years, supporting continued monetary easing.

ASIA MARKET COMMENTARY

Asian markets rose following the S&P 500's record high. The Bank of Japan increased its policy rate by 25 basis points to 0.5%, its highest since 2008, aligning with expectations. Japan's core inflation reached a 16-month high of 3% year-on-year in December. Singapore eased monetary policy for the first time since 2020, citing a sharper-than-expected inflation decline. South Korea's LG Electronics surged nearly 5% after reporting a notable increase in Q4 operating profit.

CURRENCY MARKET COMMENTARY

The U.S. dollar experienced modest declines on Thursday amid a volatile trading session. President Donald Trump’s calls for lower interest rates, coupled with a lack of clarity on tariff policies, contributed to market uncertainty. Investors remained cautious ahead of upcoming policy decisions from major central banks. The Japanese yen fluctuated following the Bank of Japan's widely expected rate hike earlier in the day. Meanwhile, the Australian and New Zealand dollars strengthened, buoyed by Trump's remarks hinting at a more conciliatory approach to tariffs on China.

COMMODITY MARKET COMMENTARY

Gold prices climbed to near three-month highs, bolstered by safe-haven demand amid U.S. trade policy uncertainties. Oil prices dropped following President Trump's call for OPEC to reduce prices and increase crude output during his Davos address. Meanwhile, Rio Tinto flagged potential Q1 disruptions due to flooding at its Pilbara rail operations caused by Tropical Cyclone Sean, affecting a key iron ore shipment hub.

Super Group Limited (SPG) -2.68%

Super Group Limited has issued earnings guidance that highlights a mixed performance across its continuing and discontinued operations. Revenue from continuing operations is forecast between R22.4 billion and R25.0 billion, reflecting a year-on-year decline of 12.5% to 2.3%. Operating profit before capital items is projected at R860 million to R970 million, representing a drop of 21.8% to 11.8%. Earnings per share (EPS) and headline earnings per share (HEPS) are expected to decline significantly, with EPS anticipated at 100–114 cents (-30.0% to -20.2%) and HEPS at 97–111 cents (-29.9% to -19.7%). These results are attributed to ongoing challenges in the South African consumer market, reduced coal exports, and softer performance in UK dealerships due to regulatory and market pressures. SG Fleet and inTime are now classified as discontinued operations. The sale of SG Fleet is expected to lower gearing from 221% to 24.1%, returning approximately R16.30 per share to shareholders. Including discontinued operations, total HEPS is expected at 233–254 cents (+15.8% to +26.2%), while total EPS is forecast at 154–175 cents (-25.2% to -15.0%). Despite these challenges, the Group is prioritizing strong cash flow generation and efficient working capital management to maintain financial stability.

Sasol Limited (SOL) -4.67%

Sasol has taken significant steps to address operational issues and improve performance. In December 2024, the company approved a Final Investment Decision (FID) for a destoning solution to enhance coal quality at Secunda Operations (SO), with commissioning anticipated by H1 FY26, ahead of schedule. The company faced challenges in December 2024 due to civil unrest in Mozambique, temporarily disrupting operations at the Central Processing Facility (CPF). While operations have since normalized, near-term risks remain. Additionally, a fire at the Natref refinery in January 2025 caused temporary disruptions, with repairs expected to be completed by February 2025. Persistent coal quality issues at SO have impacted gasifier and equipment availability. Sasol has launched destoning and reliability improvement initiatives to address these challenges and support future production. Revenue from International Chemicals increased over H1 FY24, driven by the restart of the US East Cracker in November 2024 and effective cost management, though sales volumes were constrained by outages and weaker demand. Updated guidance reflects revised annual volume expectations for SO, Natref, and International Chemicals. Fuels and Chemicals Africa sales are projected to align with FY24 levels. Sasol remains committed to self-help initiatives, including cost optimization and strategic measures, to mitigate risks and safeguard profitability.

Cashbuild Limited (CSB) -0.80%
Cashbuild has reported a 6% increase in revenue for the second quarter of FY2025 compared to the same period in FY2024. This growth was driven by a 5% rise in revenue from existing stores and a 1% contribution from nine new stores opened since July 2023. For the half-year ending 29 December 2024, revenue rose 5% year-on-year. During the second quarter, transactions at tills increased by 8%, with existing stores contributing 7% and new stores adding 1%. Selling inflation was measured at 1.5% as of December 2024. The Group opened three new stores, closed six underperforming locations, and refurbished 11 stores during the quarter, concluding the period with 318 trading stores.

The Boeing Company (BA) +2.12%

Boeing warned on Thursday that it expected a fourth-quarter loss of about $4 billion to close a year marred by a production quality crisis, stricter regulatory scrutiny, supply chain delays and a crippling strike by U.S. West Coast factory workers. The loss would be nearly triple the size expected by Wall Street. Boeing, which will release its results next week, attributed it to charges at its defense and commercial units, lower jetliner deliveries and the strike's effects. The company forecast a quarterly loss of $5.46 per share, which equates to about $4 billion, sharply steeper than analysts' average expectation of a $1.84 per share loss, according to LSEG data. Boeing shares fell 3.5% in after-hours trading as the company projected quarterly revenue of $15.2 billion, below expectations of $16.27 billion. Based on Thursday's quarterly results forecast, the company's annual loss for the year could rival 2020, when it lost nearly $12 billion, the most in its history. Boeing Commercial Airplanes expects fourth quarter revenue of $4.8 billion and an operating margin loss of 43.9%, the company said. That includes a roughly $900 million pre-tax earnings charge on its 777X program, which the company says is due to higher labor costs from the new contract that settled the strike. Boeing reiterated its plans to deliver the first 777-9 in 2026, several years later than anticipated when it launched the new airplane in 2013. It also anticipates an approximately $200 million charge on its 767 program. Boeing's defense division is expected to book quarterly revenue of $5.4 billion and an operating margin loss of nearly 42%, the company said.

Union Pacific Corporation (UNP) +5.20%

Union Pacific on Thursday posted a better-than-expected profit for the fourth quarter helped by improving volumes and robust pricing, which was partially offset by lower fuel surcharge and less profitable cargo mix. The railroad, seen as a bellwether for the U.S. economy, has benefited from improving volumes in its grain and intermodal segments following higher West Coast imports and a strong harvest season. The Omaha, Nebraska-based company reported an operating ratio of 58.7% for the quarter ended Dec. 31, an improvement from 60.9% a year earlier. Its operating revenue of $6.12 billion missed analysts' estimates of $6.14 billion. Quarterly profit came in at $2.96 per share, beating estimates of $2.78 per share, according to data compiled by LSEG.

Nikola Corporation (NKLA) -27.78%

Shares of Nikola closed Thursday down 27.8% after a report that the embattled electric truck maker is exploring options to sell parts or all of the business. The stock closed Thursday at 85 cents apiece after hitting a new 52-week low of 76 cents prior to the end of trading. Bloomberg News reported the potential sale Thursday afternoon and noted other possibilities under consideration include bringing on partners and raising new funds. The report comes three months after Nikola warned investors on its third-quarter conference call that the company only had enough cash to support its business into the first quarter of 2025 but not beyond. Nikola reported $198 million in cash to end the third quarter.

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