Sovcomflot posts $393M Q1 loss amid harsh U.S. sanctions and revenue collapse

Local Market Commentary

South Africa's Top 40 index rose 0.4% to close at 85,934.5, while the All Share index added 0.42% to reach 93,528.7 on Friday, with investor attention now turning to the SARB’s upcoming interest rate decision. The central bank previously kept rates steady in March amid concerns over global trade instability and fiscal policy credibility. The government is moving forward with regulatory reforms in the telecommunications sector, introducing an equity equivalent programme aimed at facilitating market entry for global players like Elon Musk’s Starlink. Concurrently, South Africa is re-engaging diplomatically with the U.S., with Finance Minister Enoch Godongwana highlighting progress in bilateral trade negotiations.

European Market Commentary

European equities ended Friday sharply lower as renewed tariff threats from President Trump, particularly targeting Apple and the EU, reignited market fears of a protracted trade war. The STOXX 600 fell 0.9%, marking its largest single-session drop since early April and snapping a five-week winning streak. Euro zone stocks fared worse, sliding 1.5%, while the UK’s FTSE 100 proved more resilient following its recently concluded trade deal with the U.S. Market volatility, as indicated by the Euro STOXX Volatility Index, spiked to a three-week high. Sectors most exposed to trade disruption led the downturn: auto stocks tumbled 3.1%, banks lost 1.8%, and luxury goods, highly dependent on U.S. demand, declined 2.7%, suggesting investor sensitivity to cross-border friction remains high.

U.S. Market Commentary

U.S. equity markets ended lower on Friday, registering weekly losses exceeding 2% across major indices, as President Trump’s push for 50% tariffs on European imports unsettled investor confidence. Technology, communication services, and consumer discretionary sectors bore the brunt of the sell-off, while defensive names in utilities and staples edged higher. Trump initially announced the tariffs would take effect on June 1, citing slow progress in EU trade talks, but he later agreed to a July 9 deadline following a conciliatory call with European Commission President Ursula von der Leyen. The sudden shift illustrates the persistent volatility in U.S. trade policy and its disruptive impact on global capital markets, as uncertainty around tariff implementation continues to cloud investment outlooks.

Asia Market Commentary

Asia-Pacific equities opened the week mixed, with market sentiment shaped by President Trump’s decision to postpone steep tariffs on EU imports until July 9. South Korean shares outperformed, while broader Asian markets showed uneven performance. Notably, WiseTech Global surged 5.7% following its announcement to acquire U.S.-based cloud firm E2Open for $2.1 billion in an all-debt transaction backed by a consortium of nine global banks. The deal reflects WiseTech’s strategic ambition to deepen its global software footprint and enhance cross-border logistics offerings. Investors across the region appeared cautiously optimistic, balancing deal-making momentum with ongoing geopolitical uncertainty.

Commodity Market Commentary

Gold prices edged lower on Monday as Trump’s delayed tariff deadline eased immediate market stress, reducing demand for safe-haven assets. Meanwhile, crude oil prices rose modestly in early Asian trading on the back of the revised U.S.-EU trade timeline, alongside fresh supply-side data from Baker Hughes indicating a decline in active U.S. oil rigs to 465, the lowest since November 2021. However, gains remain capped by expectations that OPEC+ could lift output quotas by 411,000 bpd in July, following incremental hikes in previous months. Investors remain watchful of the group’s upcoming meeting amid signals it may unwind voluntary cuts entirely by October.

Currency Market Commentary

The South African rand gained ground on Friday, supported by rising gold prices and a weaker U.S. dollar, as concerns over the U.S.'s deteriorating fiscal position led investors towards safer assets. On Monday, the euro and dollar both advanced against traditional safe-havens such as the yen and Swiss franc after President Trump agreed to delay the imposition of 50% tariffs on EU goods until July 9, deferring a potentially market-disruptive decision. The move extends the negotiation window under Trump’s "Liberation Day" framework, and markets responded positively to signs of diplomatic engagement between the U.S. and Europe. Nonetheless, currency volatility remains elevated amid broader trade and geopolitical uncertainties.

Nampak Limited (NPK) +2.02%

Nampak reported a resilient set of interim results for 1H25, with revenue up 11% and trading profit rising 22%, underpinned by disciplined cost control, margin management, and operational efficiencies. EBITDA increased 7% to R1.1 billion, supported by strong contributions from Diversified South Africa and Beverage Angola, while Beverage South Africa lagged due to delays in new capacity commissioning. Net finance costs declined 38%, aided by lower interest rates and a 33% reduction in net debt to R3.1 billion. Profit before tax advanced 58% to R670 million, while headline earnings from continuing operations rose 5% to R471 million. A R2.5 billion profit from discontinued operations lifted total headline earnings by 108%. Net working capital investment rose, driven by revenue growth and timing effects, though underlying cash generation remained healthy.

Quantum Foods Holdings Limited (QFH) 0.00%

Quantum Foods delivered a strong interim performance for the six months ended 31 March 2025, with revenue up 20% year-on-year to R3.6 billion, driven by sustained volume growth and improved pricing. Operating profit before capital items rose sharply by 234% to R205 million, reflecting enhanced operating leverage. Headline earnings per share (HEPS) increased 244% to 74.8 cents, while basic EPS rose 237% to 74.5 cents. Despite the strong earnings rebound, the board opted not to declare an interim dividend, maintaining a conservative capital allocation stance.

Finbond Group Limited (FGL) -6.25%

Finbond delivered a strong recovery for the year ended 28 February 2025, with profit attributable to shareholders surging to R31.8 million from just R0.6 million in the prior year, reflecting effective strategy execution, disciplined cost management, and improved operational focus across its North American and South African operations. Earnings per share rose to 7.0 cents (2024: 0.1 cents), while turnover grew 7.9% to R1.7 billion. The cost-to-income ratio improved by 3.0% to 58.5%, supporting enhanced profitability. The Group declared its first dividend in years—R43.7 million via a scrip option—with a cash alternative of 9.57 cents per share, signalling confidence in sustained earnings momentum.

JSW Steel Limited (500228) +0.29%

JSW Steel expects earnings improvement in the current quarter, supported by modest steel price increases in March and April, as well as declining coking coal costs, according to CEO Jayant Acharya. The company reported a fourth-quarter net profit of 15.03 billion rupees ($176 million), slightly below analyst estimates, weighed down by a one-time 440 million rupee charge related to its green steel unit. Revenue fell 3% to 448.19 billion rupees, impacted by subdued domestic demand amid increased cheap steel imports from China, Japan, and South Korea, prompting government-imposed safeguard duties of 12% to protect the local industry.

 Sovcomflot (Not Listed)

Sovcomflot reported a first-quarter net loss of $393 million, driven by intensified Western sanctions that have caused operational disruption, lower revenues, and vessel idling. Revenue dropped 49% year-on-year to $278.5 million, while EBITDA fell nearly 69% to $105 million. The company cited January’s U.S. sanctions—adding new vessels to the blacklist and revoking a prior licence—as especially damaging. The bulk of the loss was non-cash, linked to ship revaluations under depreciation and amortisation. Sovcomflot maintains that the sanctions are illegal, as Russia’s broader economy continues to show signs of strain amid reduced exports and growing pressure on key sectors.

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