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Retailers ‘storming away’: David Shapiro – deputy chairperson, Sasfin

Graham Briggs from Harmony resigns. ‘He’s a good man,’ says David.

   David Shapiro is with Sasfin and joins us now.

DAVID SHAPIRO: Five days out of six up – good enough – on Greece and also on the ECB extending bridging finance to Greek banks. I think that still has to be approved.

SIKI MGABADELI: With that vote last night from the parliament, I suppose that’s going to happen.

DAVID SHAPIRO: I think [there are] better attitudes towards Greece. Still a lot of work to be done. But markets are cheering to it. European markets are up seven days in a row. US markets are also up today, I think on the news. So overall a good day.
    We were led by miners, but only a few miners went up – Anglos, Billiton, and Angloplats. If you look at platinum shares there’s just one thing that worries me. European motor vehicle sales were the highest in five years in June, so why is platinum at $1 011? There is just a total disconnect, because Europe is supposedly our biggest market for platinum converters. It’s very difficult to reconcile those sales numbers because they are very big in diesel, and diesel absorbs a lot of platinum – I’m not a technician. But they all maintain “watch European car sales”.

SIKI MGABADELI: I just know there’s a catalytic converter thing that uses platinum, and we must watch that.

DAVID SHAPIRO: But they are not buying it.

SIKI MGABADELI: Could it not be because we’ve got so much stockpiled above ground?

DAVID SHAPIRO: Obviously. Even gold is starting to fall down. Apparently there are huge short positions still in the gold market.
    Kumba is also down on production numbers as well as the fact that after 80 years they are finally making a decision to close Thabazimbi.
    And there’s a lot of other news. I think the prize goes to retailers. They are storming away. Truworths – good numbers on the back of a pickup in their second-half sales. Even if you ignore their babywear companies Earthchild and Naartjie they did pretty well in the second half. So if someone likes the results they move the share up 5%.

SIKI MGABADELI: We started this year with analysts saying that these retail shares are just ridiculously expensive. Have they moved down sufficiently enough that one can look at them again?

DAVID SHAPIRO: You have to applaud the results. They are still expensive, but don’t ignore the momentum. There is a lot of buying there and I think a lot of the retailers, particularly the food retailers, are making advances at the expense of independents, of smaller companies, of smaller stores. I think the same probably applies in apparel. So the big ones are getting bigger and obviously they have the buying power. You can’t ignore Mr Price which was up today, Pick n Pay up today, and Truworths with a very, very strong showing.

SIKI MGABADELI: And MTN … [crosstalk]

DAVID SHAPIRO: Hopefully we’ll pick up tomorrow. I think news might have come through a bit late. It’s still a big trader. Just watching Richemont as well in other news, Richemont was up about 2% today. That’s because Swatch, its rival, which produces a much cheaper range of watches, is expecting very good second-half sales. So I think all watchmakers were up.
    And then other news – Graham Briggs from Harmony resigned after seven, eight years – he’s a good man. But what it does is it just highlights how miners have come under pressure because in the time that he’s been there I think the gold price is up in dollar terms about 15, 20% and yet Harmony’s share price is down about 80% – which is [because of] higher costs, lower grades, just difficulties in the industry. I don’t attribute that to him by any means but I’m just saying no wonder he is retiring.

SIKI MGABADELI: Again, one has to ask are we losing all of these really experienced CEOs in the industry who’ve kind of seen the ups and the downs.

DAVID SHAPIRO: That’s why I brought that up. After battling and battling against rising costs, wage strikes, difficulties in the country, electricity, all those kind of issues – eventually they just wear you thin and probably you say “I’m out”.

SIKI MGABADELI: We’re going to be talking about the South African steel industry – Arcelor Mittal and Highveld Steel, all of those guys. It’s just a major struggle.

DAVID SHAPIRO: It is a struggle and it also points to reduced manufacturing demand here, reduced mining demand, so they are really battling.

SIKI MGABADELI: They also have Chinese imports coming in with no import duty on them, and just flooding the market. It’s obviously going to make a difference.

DAVID SHAPIRO: It’s very, very hard. I don’t know what the correct thing to do is, because if you do impose tariffs on it then it makes you uncompetitive. There it also allows you be uncompetitive. I don’t understand the industry but I would imagine that local manufacturers could actually keep up. I think a lot stems from local conditions as well, where we have load-shedding, we have labour strikes, and we have issues here. So we must also look at it from that angle. But you need experts.

SIKI MGABADELI: We are chatting to Paolo Trinchero, who is CEO of the Southern African Institute of Steel Construction, on where the industry is.
    And we’ll get a view on that offer from Curro for ADvTECH.

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