Global stocks mixed as trade tensions, US Fed meeting weigh on sentiment

PPC’s largest segment is South Africa and Botswana:
a) Price increases should continue to help improve margins.
b) Increased construction from lower interest rates, improvement in infrastructure and thematic themes such as urbanisation could potentially help with industry growth. Volumes could also further benefit from expansion projects such as the R3 billion cement plan in the Western Cape. Thanks to its premium cement, the company can safeguard its market share against competitors offering lower-quality products, especially where quality is a priority for customers.
c) However, volumes are going to remain under pressure as competition remains high and exacerbated by price increases.
d) The real opportunity lies in government intervention: government spend (infrastructure plan), import tariffs and SOE performance.
International (Zimbabwe): The company switched to hard currency; the dollar cleans up reporting with no more hyper-inflation items.

Our valuation has an upside of 6% which supports our hold view. We value the company on a discounted cash flow basis which takes into account dividends received in international business. A high discount rate was applied due to inflationary pressure in Zimbabwe and uncertainty relating to supply demand dynamics in the cement industry.

On 13 March 2025, Standard Banks released its FY24 results. Highlights from the results were as follows:

1. Net interest income increased by 3% to R101 billion.
   a) Average interest earning assets grew by 4%.
   b) Net interest margin decreased from 4.94% to 4.90%.
2. Non-interest revenue (NIR), including insurance and asset management, increased by 1% to R80 billion.
   a) Banking net fee and commission income (representing 40% of the total R80 billion) increased by 4% (11% in constant currency) due to client and volume growth combined with price increases.
   b) Combined net income from insurance and asset management had strong growth (+11%) benefiting from positive market movements while insurance also benefitted from 14% growth in new business value.
   c) Other gains and losses on financial instruments were a large detractor, with R1.7 billion decrease, impacted by assets being reclassified resulting in the related income being classified to net interest income in 2024.

Our research supports a buy recommendation.

• Old Mutual has 12% upside to our intrinsic value at the time of this report. We believe a continuation in an improving consumer from lower interest rates combined with management efforts to improve profitability through margin-accretive sales (mix), interventions to improve persistency and expense and capital management should serve as potential catalysts to unlock this upside.
• We expected the near-term loss run rate of the bank to be a headwind in an already very competitive environment in both the insurance and banking sectors.

Headline earnings increased by 20% to R8.8 billion, driven by higher results from operations, stronger shareholder investment returns, and a non-repeat of prior year once-off losses relating to IFRS 17 accounting transition. Our research supports a buy recommendation.