PDD beats on revenue and EPS but profit hit by heavy spending, margins pressured

South Africa

The Top 40 index added 0.28% yesterday to reach 95,329.3 points, while the All Share index gained 0.25% to close at 102,978.5 points. Sasol is managing the impact of 30% U.S. tariffs, potentially affecting $80m in chemical exports, as investors monitor South Africa’s industrial health. Airports Company SA reported net profit more than doubling to R1.1bn for FY2025, supported by post-Covid recovery and double-digit revenue growth. Key domestic data this week includes business cycle indicators, producer inflation, money supply, private sector credit, trade balance, and budget figures. The Financial Sector Conduct Authority is consulting on central clearing for certain OTC derivatives and tighter capital requirements for non-bank providers, aiming to reduce systemic risk over the next three years.

Europe

European equities retreated, giving back gains from Friday, as markets digested potential U.S. interest rate cuts and domestic inflation pressures. The STOXX 600 fell 0.4%, near record highs. UK shop prices rose 0.9% month-on-month, driven by 4.2% food inflation, raising Bank of England concerns. Irish consumer sentiment recovered to 61.1. Norway’s $2tn wealth fund divested from Caterpillar and five Israeli banks over ethical concerns. JDE Peet’s gained on a buyout, while Puma surged 16% on sale speculation. Overall, inflation, tariffs, and geopolitical considerations remain key market drivers.

United States

Wall Street closed lower as investors weighed U.S. interest rate guidance ahead of key economic releases. Nvidia (NVDA.O) rose 1% ahead of its quarterly report, a critical test for the AI-driven rally, while the Dow remains near record highs. Markets await the PCE Price Index on Friday and next week’s nonfarm payrolls, crucial for Fed policy direction. Sentiment was unsettled after President Trump announced the unprecedented removal of Fed Governor Lisa Cook over alleged mortgage improprieties, raising questions about executive influence on independent monetary policy.

Asia

Asian markets mostly declined amid U.S. tariff threats and geopolitical uncertainty. President Trump signalled potential 200% tariffs on China for rare-earth magnets and warned against digital taxes. The firing of Fed Governor Lisa Cook also spurred volatility. Nissan Motor shares fell 6% after Mercedes-Benz pension trust announced the sale of its 3.8% stake, framing it as portfolio restructuring. Japanese officials highlighted concerns over foreign exchange movements, particularly the strengthening yen. Investor focus remains on trade tensions, currency volatility, and corporate governance developments impacting regional equities.

Currencies

The South African rand eased after reaching a nine-month peak, with investors booking profits following Friday’s rally driven by gold strength and a weaker dollar. In Asia, the U.S. dollar weakened after President Trump’s removal of Fed Governor Lisa Cook over alleged mortgage fraud. The dollar index fell 0.3% to 98.187, following its largest daily gain of the month on Monday. Currency markets remain sensitive to Federal Reserve guidance, domestic economic data, and geopolitical developments, including U.S. trade and regulatory actions affecting global capital flows.

Commodities

Oil prices eased after a near 2% rally, as traders monitored the Russia-Ukraine conflict for potential supply impacts. Gold steadied on Monday, with attention on upcoming U.S. PCE data to gauge Federal Reserve policy, while a stronger dollar limited gains. Gold touched a near two-week high on Friday following signals from Fed Chair Jerome Powell of a possible interest rate cut next month, though he flagged rising labour market risks and persistent inflation pressures.

Harmony Gold Mining Company Limited (HAR) -2.12%

Harmony Gold marked its 75th anniversary with a tenth consecutive year of meeting guidance, delivering FY25 production of 46 023kg (1.48moz) towards the upper end of guidance, supported by strong South African underground operations and Hidden Valley in Papua New Guinea. Underground grades improved 3% to 6.27g/t, while all-in sustaining costs were maintained at R1.05m/kg (US$1 806/oz), within range. Earnings are set to rise sharply on a 27% higher realised gold price, stronger revenues and no impairments, partly offset by inflationary costs, royalties and R3.5bn in higher taxation. EPS is expected to increase 57–77% y/y, with FY25 results due 28 August.

Sasol Limited (SOL) +11.68%

Sasol reported a resilient FY25 performance despite weaker oil prices, refining margins and lower sales volumes, with turnover down 9% to R249bn and adjusted EBITDA 14% lower at R51.8bn. Strong cost control and capital discipline supported a 75% increase in free cash flow to R12.6bn, aided by one-off gains including a R4.3bn Transnet settlement. Impairments were sharply reduced to R20.7bn from R74.9bn, while net debt fell 13% to R65bn. EPS rebounded to R10.60 from a loss of R69.94, and HEPS rose 93% to R35.13. Liquidity was strengthened by a R5.3bn bond issuance and proactive hedging strategies.

Momentum Group Limited (MTM) -0.87%

Momentum Group expects a strong uplift in earnings for FY25, with EPS guided at 431–459c, up 52–62% from 283c in FY24. HEPS is projected at 432–462c, a 45–55% increase, while diluted normalised HEPS is set to rise 41–51% to 436–467c. Performance was underpinned by robust life business earnings from in-force books, favourable mortality and morbidity trends, disciplined underwriting at Momentum Insure, and strong contributions from Guardrisk. Investment markets and yield curve effects further supported results. The group highlighted continued capital strength, liquidity resilience, and strong cash generation, with full results due 17 September 2025.

ADvTECH Limited (ADH) +2.04%

ADvTECH delivered a strong first-half performance, with revenue up 10% y/y to R4.68bn and operating profit before non-trading items rising 14% to R982m. Normalised earnings grew 16% to R620m, driving NEPS 16% higher at 113.0c, while HEPS increased 15% to 112.7c. EPS also advanced 16% to 113.0c. The board declared an interim dividend of 45.0c per share, up from 38.0c, maintaining a dividend cover of 2.0x. Strong cash generation and disciplined capital management underpinned the results, with management reiterating its focus on optimising returns on equity while supporting sustainable shareholder distributions.

Italtile Limited (ITE) +6.06%

Italtile reported resilient FY25 results despite subdued building sector conditions, with system-wide turnover down 2% to R11.3bn but trading profit stable at R2.1bn, supported by a 3% reduction in operating costs. EPS rose 3% to 125.6c and HEPS increased 2% to 125.1c. The store network expanded to 210 outlets, while cash rose 18% to R2.2bn. Dividends were lifted, with the ordinary payout up 2% to 50c and the special dividend up 26% to 98c, resulting in a 17% increase in total dividends to 148c. Management highlighted market share gains, strong brand loyalty and readiness for sector recovery.

Clientèle Limited (CLI) +6.56%

Clientèle expects a sharp earnings uplift for FY25 following the first-time consolidation of 1Life Insurance. EPS is projected to rise 129–149% to 224.9–244.6c, driven by a once-off R403m bargain purchase gain, while HEPS, excluding this non-recurring item, is expected to increase 39–59% to 136.9–156.6c. The recent acquisition of Emerald Life, completed in June, had no income statement impact but added c.R130m goodwill to the balance sheet. Management highlighted continued strong cash generation, solvency and liquidity. Full results will be published on or about 5 September 2025, with further details on the acquisitions and their financial impact.

Mercedes-Benz Group AG (MBG) -0.98%

Mercedes-Benz’s pension trust is divesting its 3.8% stake in Nissan Motor, worth approximately $346m, in a move that underscores investor caution around the Japanese automaker’s turnaround prospects. Nissan shares have fallen 24% year-to-date, pressured by U.S. tariffs, restructuring efforts, and weaker sales volumes. The sale, priced at a 5–7% discount to the last close, highlights limited strategic importance for Mercedes and raises concerns over Nissan’s ability to restore profitability through plant closures and cost-cutting. The divestment follows Nissan’s earlier sale of its Daimler stake in 2021, with settlement expected this week.

PDD Holdings Inc. (PDD) +0.87%

PDD Holdings reported a 7% rise in Q2 revenue to 103.98bn yuan ($14.5bn), ahead of expectations, though operating profit fell 21% amid heavy investment to counter competition. While adjusted EPS of 22.07 yuan exceeded forecasts, margins remain pressured by steep discounts in China, higher international shipping costs, and merchant support initiatives. Temu’s shift to a fully managed model aims to leverage PDD’s supply chain for pricing power, though U.S. shoppers are beginning to notice price hikes. Shares gained modestly after executives flagged continued spending volatility, with investors weighing near-term profitability pressures against long-term ecosystem growth.

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