Shell Boosts Shareholder Returns with Increased Buybacks, Targets 40-50% Cash Flow Distribution.

Local Market Commentary

The Top 40 index gained 0.85% yesterday, closing at 82,312.2 points, while the All Share index rose 0.82% to 89,713.0 points. South Africa's composite leading business cycle indicator increased by 0.9% month-on-month in January, reflecting trends in vehicle sales, business confidence, and money supply. The Trump administration has nominated conservative activist and writer Leo Brent Bozell III as the next US ambassador to South Africa. The nomination comes amid strained US-South Africa relations, with tensions heightened by South Africa's case at the International Court of Justice accusing Israel, a key US ally, of genocide in Gaza.

European Market Commentary

European shares closed higher on Tuesday as global markets rallied on optimism that US President Donald Trump may take a softer tariff approach ahead of the 2 April deadline. The STOXX 600 index rose 0.7%, marking its first gain in four sessions. Investor sentiment was also boosted by German data showing improved business morale, following Berlin’s approval of major spending plans to revive the economy and expand military funding. These investments have strengthened euro zone growth forecasts, helping European equities outperform US markets this year. Meanwhile, the US announced that Ukraine and Russia separately agreed to ensure safe navigation in the Black Sea and halt attacks on energy facilities.

U.S. Market Commentary

The S&P 500 surged to its highest level in over two weeks on Monday, driven by gains in Nvidia and Tesla amid hopes that the Trump administration may take a more measured approach to tariffs. Trump indicated automobile tariffs are imminent but suggested some countries may receive exemptions, without providing details. Markets remain volatile due to inflation concerns and fears of an economic downturn following last month’s tariff announcements on key trading partners. A survey showed US business activity improved in March, though worries over tariffs and government spending cuts persist. Investors are now focused on Friday’s release of the Personal Consumption Expenditure price index, the Federal Reserve’s preferred inflation measure.

Asia Market Commentary

Asia-Pacific markets traded higher, following Wall Street gains on optimism that US President Donald Trump’s tariffs may be softer than expected. Thailand’s Prime Minister Paetongtarn Shinawatra survived a no-confidence vote amid opposition claims of unfitness for office and external influence. Bank of Japan Governor Kazuo Ueda stated that interest rate hikes would continue if economic conditions align with expectations. Meanwhile, Australia’s February inflation eased to 2.4% year-on-year, down from 2.5% in January and below economists' forecasts.

Currency Market Commentary

South Africa's rand continued its rally on Tuesday as markets awaited clarity on US President Donald Trump's tariff plans. The dollar took a pause on Wednesday, weakened by poor US confidence data and concerns over the impact of tariffs on US economic growth. It fell around 0.5% against the yen, dropping below 150 yen to 149.95 early in the Asia session. The euro steadied at $1.0789 after a week of decline from a five-month high, while neither the euro nor Russia's rouble reacted immediately to US deals with Russia and Ukraine to pause attacks at sea and on energy targets. Wheat prices fell following the US push to lift sanctions on Russian agriculture.

Commodity Market Commentary

Gold prices remained steady on Wednesday as investors adjusted positions ahead of US President Donald Trump’s tariff plans, which are expected to drive inflation and slow economic growth. Meanwhile, oil prices rose in early Asia trade due to supply concerns after Trump threatened tariffs on countries importing oil and gas from Venezuela and as US crude inventories declined more than anticipated.

Remgro Limited (REM) +4.36%

Remgro's performance in the first half of the 2025 financial year demonstrated progress in disciplined capital allocation and active partnerships within its portfolio, leading to a 38.7% increase in headline earnings. The company reported improved operational performances from major investee companies such as Rainbow Chicken, RCL Foods, OUTsurance, and Mediclinic. Despite macroeconomic instability, Remgro's strategy to focus on sustainable performance and capital discipline has yielded positive results, including a 10.3% rise in intrinsic net asset value. Remgro declared an interim dividend of 96 cents per share, up from 80 cents in the previous year. The company remains focused on unlocking further potential within its portfolio, with continued efforts to optimise performance.

Barloworld Limited (BAW) -0.10%

Barloworld delivered mixed results for the five months ending 28 February 2025, with revenue declining 4.9% to R14.8 billion, while EBITDA dropped by 12% to R1.6 billion. The performance was bolstered by strong growth from Barloworld Mongolia and a successful turnaround plan at Ingrain, although results were weighed down by low activity at Vostochnaya Technica (VT). Excluding VT, revenue declined 2%, but EBITDA grew 3%. In the Industrial Equipment segment, revenue from Equipment Southern Africa dropped 9.2%, impacted by a slow recovery in the mining sector and unrest in Mozambique, but Barloworld Mongolia saw a 44% increase in revenue. The group’s order book grew by 13%, showing promising future prospects.

Oceana Group Limited (OCE)+0.93%

Oceana Group's financial results for the five months ending 23 February 2025 were significantly lower than the record performance of the prior period, driven mainly by the normalisation of global fishmeal and fish oil prices following the recovery of Peruvian production. Lucky Star Foods reported a 5% increase in sales volumes, benefiting from steady demand for affordable protein and improved production efficiency. However, this was offset by higher inventory levels and borrowing costs due to changes in frozen fish sourcing. The Fishmeal and Fish Oil divisions faced challenges, with lower global prices impacting performance, despite higher production volumes in Africa. Wild Caught Seafood showed positive signs of improvement, particularly in Namibia, with higher catch rates and strong demand in European and South African markets.

Shell PLC (SHEL) +1.47%

Shell plans to return more cash to shareholders through increased buybacks, raising its distribution target to 40-50% of cash flow from operations. The company aims for a 4-5% annual LNG sales growth over the next five years, estimating global demand to rise by 60% by 2040. Shell is exploring strategic partnerships in the US for its chemicals assets while considering closures in Europe. It has reduced its investment budget to $20-22 billion annually through 2028 and continues a $3.5 billion share buyback programme. With a 4% annual dividend growth policy, Shell targets over 10% annual free cash flow growth per share by 2030 and $5-7 billion in cost reductions by 2028.

GameStop Corporation (GME) -0.82%

GameStop has approved bitcoin as a treasury reserve asset, following a recent US executive order on cryptocurrency reserves. The company plans to invest a portion of its cash or future financing in bitcoin but has not disclosed a maximum purchase amount. GameStop reported a rise in fourth-quarter net income to $131.3 million, more than doubling from the previous year, driven by cost-cutting efforts amid ongoing challenges in its core retail business. Revenue fell to $1.28 billion from $1.79 billion, reflecting the shift to digital gaming. The company closed 590 US stores in fiscal 2024 and expects further closures in 2025.It reported fourth-quarter revenue of $1.28 billion, compared to $1.79 billion a year earlier.

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