Major International Business Headlines Brief::: 28 August 2020

Fri Aug 28 05:56:02 CAT 2020

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Major International Business Headlines Brief::: 28 August 2020

 <mailto:info at bulls.co.zw> 

ü  South Africa's Massmart ups cost-saving target as loss widens

ü  South Africa's Denel not planning to seek further bailouts

ü  Sibanye-Stillwater back in profit in first half on higher metals prices

ü  African Development Bank re-elects Akinwumi Adesina as president

ü  Nigeria targets non-oil exporters to boost FX as recession looms'

ü  Wet weather conditions lower estimate for South Africa's 2020 maize
output

ü  Uganda's coffee exports surge 17% in July on output from new trees

ü  South African rand dips before producer price data

ü  South African drugmaker Aspen expects 7-11% full-year earnings growth

ü  Angola's energy roadmap aims to reverse oil output decline

ü  Walmart joins Microsoft in bid for TikTok's US operations

ü  Pret A Manger to cut 3,000 jobs in the UK

ü  Fed relaxes inflation target in policy shift

ü  Europe to start Boeing 737 Max test flights

ü  TikTok boss quits as Trump's ban looms

ü  Rolls-Royce reports record loss as travel slumps

 <mailto:info at bulls.co.zw> 

South Africa's Massmart ups cost-saving target as loss widens

JOHANNESBURG (Reuters) - South African retailer Massmart Holdings Ltd has
raised its three-year cost saving target to 1.9 billion rand ($113 million)
as it seeks to halt expense growth, improve margins and exit loss-making
stores, its chief executive said on Thursday.

A turnaround plan announced earlier this year by the company, majority-owned
by Walmart Inc and whose brands also include Makro and Game, has started to
yield results, CEO Mitchell Slape told analysts in a presentation.

Shares in the company climbed 11.7% by 1240 GMT, hitting a four-month high,
as its improved outlook offset a 1.1 billion rand headline loss for the six
months to June 28. The company had warned last week that its half-year loss
would deepen because of the impact of the COVID-19 pandemic.

Massmart, whose performance had suffered even before the pandemic as
cash-strapped customers battle high unemployment, modest wage increases and
higher average fuel and utility prices, has identified 400 million rand in
additional cost savings, Slape said.

Those savings include rental reductions, managing utility costs, reducing
marketing spend and a recruitment freeze.

He said the company had begun rationalising some group functions and is
consolidating support teams into fewer physical office locations.

Massmart has also appointed a Walmart specialist as chief supply chain
officer as it continues to reorganise its supply chain and negotiate better
terms with suppliers.

The company will begin seeing significant cost savings from the second half
of the year, Chief Financial Officer Mohammed Abdool-Samad said.

Total group expenses grew just 1.9%, compared to 19.3% in the same period
last year, as employment costs and occupancy costs declined 2.2% and 6.4%
respectively.

Meanwhile its gross profit margin grew 90 basis points to 20.1%.

However, panic buying and a demand spike seen at major department store
chains ahead of a lockdown imposed in South Africa in late March was not
enough to boost sales.

Government-imposed restrictions meant Massmart was not allowed to sell
liquor, tobacco, building materials, and general merchandise products such
as TVs. Those items contribute about 56% of its total sales.

Massmart lost 4.6 billion rand worth of sales during the initial nine weeks
of the lockdown. Its total sales fell 9.7% to 39.6 billion rand in the first
half as a whole, with comparable-store sales decreasing by the same amount.

Online sales surged by a record 95% but the net impact was minimal as they
contribute just 2.1% to total turnover.

($1 = 16.8514 rand)

South Africa's Denel not planning to seek further bailouts

JOHANNESBURG (Reuters) - South African state defence firm Denel is not
planning to seek new government equity injections despite a liquidity crunch
aggravated by the coronavirus crisis, its interim chief executive told
Reuters on Thursday.

Denel, which makes military equipment for South Africa’s armed forces and
clients around the world, is one of several troubled state-owned companies
in the country that have been kept afloat by government bailouts in recent
years.

It has struggled to pay salaries this year amid export restrictions and
declining revenue. Last week the government said Denel made a 1.7 billion
rand ($100 million) loss in the 2019/20 financial year.

“At this stage it is not in our plan,” Talib Sadik said in an interview,
when asked whether Denel would approach the government for further bailouts.
“Our view is that we also need to fix our own house, because what we have is
a bit of moral hazard happening.”

Sadik became interim CEO this month after his predecessor Danie du Toit
resigned, without giving reasons.

Du Toit had told Reuters in a July interview that Denel’s survival could be
at stake if conditions attached to an earlier bailout - which was earmarked
to pay down government-guaranteed debt - were not eased.

Denel received 1.8 billion rand from the state in 2019 and in this year’s
budget was promised another 576 million rand, which it is receiving in
instalments.

Sadik said that although Denel was not asking for more money from taxpayers
beyond what was promised in this year’s budget, it was talking to the
defence ministry about a retainer to help it maintain some capabilities the
government considers strategic.

Denel, which makes equipment ranging from armoured vehicles to attack
helicopters and missiles, does not need to enter a local form of bankruptcy
protection called “business rescue” despite speculation in local media, he
said.

State-owned airline South African Airways entered business rescue last year.

Sadik said Denel had started discussions with the Public Investment
Corporation and other bondholders about rolling over more than 2.6 billion
rand of debt maturing next month.

“In the past we have successfully rolled over,” he said.

Executives are trying to reach a settlement with labour unions about salary
payments owed to some staff and hope to conclude one or two equity
partnerships by April next year as part of a turnaround strategy.

($1 = 16.9239 rand)

Sibanye-Stillwater back in profit in first half on higher metals prices

JOHANNESBURG (Reuters) - Sibanye-Stillwater on Thursday reported a half-year
profit boosted by higher precious metals prices and a weaker rand currency.

The precious metals producer, said headline earnings per share (HEPS) for
the six months to June was 350 cents ($0.21)per share compared with a loss
per share of 54 cents a year earlier when output was hit by strikes.

HEPS is he main profit measure used in South Africa.

The company reinstated a dividend and declared an interim dividend of 50
cents per ordinary share.

($1 = 16.9571 rand)

African Development Bank re-elects Akinwumi Adesina as president

ABIDJAN (Reuters) - The African Development Bank (AfDB) said on Thursday its
board had re-elected Akinwumi Adesina for a second five-year term as AfDB
president.

The Abidjan-based bank conducted the vote to reappoint Adesina during its
annual meeting on Thursday, which is being held via video link.

Adesina, who was running unopposed, gained 100% of votes cast, the bank said
in a statement.

His reappointment comes after the bank’s ethics committee and an independent
panel investigated whistleblowers’ allegations he had abused his office and
cleared him of all wrongdoing in July.

Nigeria targets non-oil exporters to boost FX as recession looms

ABUJA (Reuters) - Nigeria’s central bank is trying to force non-oil
exporters to process dollar proceeds through domestic lenders to increase
dollar liquidity and support the ailing currency, a circular seen by Reuters
showed on Thursday.

The central bank said exporters who fail to remit dollar proceeds through
the lenders will be denied access to official currency markets, the circular
said.

Exporters have cited the value of the currency on the official market, where
the naira is trading at a discount of around 20% to the black market, as a
reason for hoarding dollars or bypassing banks to take advantage of black
market rates.

Exporters also sometimes conduct trade via offshore accounts.

The central bank also directed lenders to stop processing letters of credit
for imports for third-party suppliers or brokers with immediate effect. That
could limit imports into the country.

Nigeria, which for months has sought to shore up its dwindling reserves,
posted an economic contraction of 6.1% in the second quarter and expects
further contractions in the third and fourth quarters, the presidency said
on Wednesday.[nL8N2FS4SU][nL8N2FQ193]

Nigeria has been rationing dollars in recent months to conserve reserves
after it moved to unify its multiple exchange rates this month to qualify
for a $1.5 billion World Bank loan, which is yet to be approved.

But dollar shortages have worsened afterwards with reserves now down 11.5%
from a year ago. The bank has now turned its spotlight on exporters.

The central bank has proposed talks with chief executives of multinational
companies in Nigeria to discuss the revamp of exports, particularly for
agricultural produce, and diversifying the country away from its reliance on
crude oil.

But plans face hurdles as weak growth and rising inflation hobble businesses
worried about consumer demand and the impact of the coronavirus on logistics
and global supply chains.

Cocoa is Nigeria’s biggest non-oil export but the sector has struggled to
compete with top producers Ivory Coast and Ghana due to low yields, poor
farm inputs and financing, which limits output.

Wet weather conditions lower estimate for South Africa's 2020 maize output

JOHANNESBURG (Reuters) - South Africa will likely harvest 15.537 million
tonnes of maize in 2020, slightly lower than last months estimate after wet
weather conditions delayed deliveries, the government’s Crop Estimates
Committee (CEC) said on Thursday.

Giving its seventh production forecast for the 2020 crop, the CEC estimated
that harvest would be 38% higher compared with 11.275 million tonnes
harvested in the previous year when yields were hurt by dry weather
conditions.

In July, the CEC pegged this year’s crop at 15.545 million tonnes.

The crop is forecast to consist of 6.534 million tonnes of yellow maize,
used mainly in animal feed, and 9.003 million tonnes of white maize, used
for human consumption.

The CEC’s estimate is slightly higher than the result of a Reuters survey,
based on an average of estimates from five traders and analysts, that had
pegged the harvest at 15.386 million tonnes.

Uganda's coffee exports surge 17% in July on output from new trees

KAMPALA (Reuters) - Uganda’s coffee exports rose 17.2% in July from the same
month last year, boosted by output from maturing new coffee trees and easing
coronavirus restrictions, the sector regulator said on Thursday.

Africa’s largest coffee exporter shipped 543,251 60-Kilogram bags of coffee
in July, up from 463,709 bags exported in the same month last year.

It is the highest amount of coffee exported in a month since 1991, according
to Uganda Coffee Development Authority (UCDA).

The regulator said there was “increased production on account of fruition of
the newly planted coffee, and favourable weather.”

Traders also released higher stocks after authorities started easing some of
anti-coronavirus restrictions, the regulator added.

South African rand dips before producer price data

JOHANNESBURG (Reuters) - South Africa’s rand was slightly weaker early on
Thursday, ahead of the release of the producer price index (PPI) which will
give more clues about inflation dynamics in Africa’s most industrialised
economy.

Many analysts expect a rate-cutting cycle by the South African central bank
to be over, but there is still a slim chance of further rate cuts in the
remainder of the year if inflation pressures remain contained.

At 0632 GMT, the rand traded at 16.9250 versus the dollar, 0.3% weaker than
its previous close.

PPI data is due around 0930 GMT and is forecast to show an increase of 1.7%
in July, following a 0.5% increase in June.

The consumer price index rose 3.2% last month, data showed on Wednesday. The
rand fell after that release as some traders felt it left the door open for
the South African Reserve Bank to cut its repo rate again.

The SARB has already cut rates by 300 basis points this year in response to
a collapse in inflation and weak economic projections linked to the COVID-19
pandemic.

Government bonds were also a touch weaker early on Thursday, with the yield
on the 2030 bond rising 3 basis points to 9.325%.

South African drugmaker Aspen expects 7-11% full-year earnings growth

JOHANNESBURG (Reuters) - South Africa’s Aspen Pharmacare Holdings Ltd
expects growth in its headline earnings per share (HEPS) from continuing
operations of between 7-11% for the full year that ended June 30, the
company said in a statement on Thursday.

HEPS is the main profit measure in South Africa.

Its HEPS is likely to be between 12.39 rand ($0.7322) and 12.86 rand, it
said.

Most pharmaceutical companies were declared essential operations during the
country’s coronavirus lockdown, imposed at the end of March, but as most
people stayed at home demand for over-the-counter medicines declined.

Revenue growth for the year will be between 8% and 10%, while it will be
between 3% and 5% in constant exchange rates, as the rand weakened against
most other currencies, Aspen said.

South Africa’s biggest supplier of drugs said the company benefited from
positive demand trends in products used in the clinical management of
COVID-19, stockpiling of healthcare products and advanced filling of
prescriptions during early and peak periods of the spread of the virus.

But most of these benefits were offset due to a decrease in demand as the
pandemic progressed, delays in elective or planned surgeries in most regions
and reduced infection rates in non-COVID communicable diseases due to social
distancing, the company said.

Aspen, which has a 22% market share in sub-Saharan Africa, said impairments
for the year were expected to be approximately 1.5 billion rand, as compared
with 3.8 billion rand seen last year.

($1 = 16.9224 rand)

Angola's energy roadmap aims to reverse oil output decline

LONDON (Reuters) - Africa’s second-biggest oil exporter, Angola, has
unveiled a 2020-2025 energy roadmap which foresees oil discoveries of up to
57 billion barrels of crude oil and 27 trillion cubic feet of gas, state
news agency ANGOP reported.

The plans involve $679 million in foreign investment and $188 million by the
Angolan state, the agency reported late on Wednesday, part of an effort to
reverse years of declining oil output and boost revenue for an economic
reform drive.

Angola’s proven oil reserves currently stand at just seven billion barrels,
according to the new Hydrocarbon Exploration Strategy cited in the report.

A study published earlier this week by the state hydrocrabon body, the
Agencia Nacional de Petroleo, Gas e Biocombustiveis (ANPG), projected a
sharp decline in crude production from existing fields beginning in 2008 and
set to accelerate to almost nothing by 2040.

Under new leadership since 2017, Angola has sought to root out corruption,
streamline laws to ease foreign investment and privatise key arms of its
oil-dependent economy.

But cratering oil prices wrought by the coronavirus pandemic saw all oil
drilling activity by international majors like Total, Eni and BP grind to a
halt this year.

Total announced this month that its exploration activity had resumed with
one drill ship, and the entrance of Qatar Petroleum into an exploration
agreement with Total and the state oil company Sonangol may signal renewed
international interest in Angola’s challenging offshore fields.

According to Reuters ship tracking data, the Maersk Voyager ship contracted
in January by Total to drill the deepest ever oil well, but idled in April,
got underway on Wednesday and is set to resume work.

Walmart joins Microsoft in bid for TikTok's US operations

The US retail giant Walmart has said it will team up with Microsoft to make
a bid for the US operations of TikTok.

Walmart told the BBC it thought a deal with the Chinese video-sharing app
would help it expand its operations.

TikTok has been given 90 days to sell its US arm to an American firm or face
a ban in the country. Donald Trump has alleged it shares its user data with
Beijing - claims it denies.

Earlier on Thursday the firm's boss resigned ahead of the impending ban.

Confirming that the company was pursuing a deal, a Walmart spokesperson told
the BBC: "We are confident that a Walmart and Microsoft partnership would
meet both the expectations of US TikTok users while satisfying the concerns
of US government regulators."

Microsoft, which confirmed at the beginning of August that it was in talks
with TikTok, told the BBC it had "nothing to share at this time".

With Walmart, which owns UK supermarket chain Asda, it will now go up
against other prospective bidders, including the US tech giant Oracle.

According to reports, TikTok's US operations could fetch as much as $30bn
(£22bn) if a deal is reached.

Since its global launch at the end of 2018 Tiktok has attracted a huge
following, especially amongst the under-25s.

The app lets its followers create short videos, with the help of an
extensive database of songs and wide range of filters.

Data at risk?

However, the Trump administration has accused its owner, the Chinese
internet firm Bytedance, of being a threat to US national security.

It says the data the company collects from its 800 million users - 100
million of whom are reported to be in the US - is at risk of exploitation by
the Chinese government.

India's government has also banned TikTok, along with dozens more
Chinese-made apps, claiming they "surreptitiously" transmit users' data.

Beijing has denied such claims, calling the US ban politically motivated.

The founder of ByteDance, Zhang Yiming, has faced criticism for his decision
to sell to a US company. But in a letter to his Chinese staff he said it was
the only way to prevent the app from being taken down in America.

It's not the only Chinese-owned app to attract the suspicion of the US
authorities - the messaging app WeChat also faces a ban.--bbc

Pret A Manger to cut 3,000 jobs in the UK

Sandwich chain Pret A Manger is to cut 3,000 jobs, or more than a third of
its workforce, as part of a plan to save the business.

The jobs will mainly go at its shops, but 90 roles will also be lost at its
support centre.

The chain has been hit as demand from commuters and office workers - a key
market - has plunged in the pandemic.

It had already said it would permanently close 30 of its stores earlier this
summer.

Boss Pano Christou said he was "gutted" to lose so many colleagues.

"Although we're now starting to see a steady but slow recovery, the pandemic
has taken away almost a decade of growth at Pret.

"We've managed to protect many jobs by making changes to the way we run our
shops and the hours we ask team members to work.

"I'm hopeful we'll be able to review all these changes now that trade is
improving again."

Pret a Manger to cut staff hours

Upper Crust owner to cut up to 5,000 jobs

Like other retailers, Pret was forced to close for several months during
lockdown, but while restrictions have eased, its trading has remained
subdued.

It 367 UK stores are now open for significantly fewer hours than they were
before the pandemic, and the firm has asked staff to reduce their hours.

'Recovery under way'

The chain said its weekly sales were around £5.2m in August - about the
level they were in August 2010, when the business was considerably smaller.

However, it said a recovery was "clearly under way", with sales having grown
by 7% each week since July.

The firm had warned it would cut 1,000 jobs back in June, but that number
has risen after it finalised a restructuring deal this week.

It is the latest hospitality company to announce cuts due to the impact of
the pandemic.

Upper Crust-owner SSP Group has said it will cut up to 5,000 jobs, as it
struggles with the reduction in passenger travel at railway stations and
airports.

Pizza Express, Byron Burger and Frankie & Benny's owner, the Restaurant
Group, have also announced large-scale store closures and job cuts.

About 80% of hospitality firms stopped trading in April and 1.4 million
workers were furloughed - the highest proportions of any sector - according
to government data.

Industry body UK Hospitality says around a third of restaurants and bars
have still not reopened despite the easing of lockdown, as people remain
nervous about the spread of the virus.--bbc

Fed relaxes inflation target in policy shift

The Federal Reserve has signalled a major shift in its approach to managing
inflation, as it tries to do more to aid the US economy's recovery.

The central bank will now target an "average" of 2% inflation, rather than
making 2% a fixed goal, giving it more flexibility, boss Jerome Powell said.

It will allow the bank to keep interest rates lower for longer, stimulating
growth to help tackle unemployment.

It comes as millions are out of work due to the economic hit of coronavirus.

"It is hard to overstate the benefits of sustaining a strong labour market,
a key national goal that will require a range of policies in addition to
supportive monetary policy," Mr Powell said.

The Federal Reserve has for years seen 2% as an optimal level of inflation
to maintain a healthy economy.

If it feels inflation could go above that level, it can raise interest rates
- however this makes borrowing money more expensive for consumers and
businesses.

With the US in a sharp recession due to the pandemic, the Fed has cut rates
to almost zero and launched a $700bn stimulus programme to help revive
growth.

But speaking at Jackson Hole, the Fed's annual economic symposium, Mr Powell
said the bank needed to go further in order to tackle unemployment, which is
currently above 10%.

"There is a particular part of the economy which involves getting people
together and feeding them, flying them around the country, having them sleep
in hotels, entertaining them," Mr Powell said.

"That part of the economy will find it very difficult to recover... That is
millions of people who are going to struggle to find work. We need to stay
with those people... We are looking at long tail of probably a couple of
years at least."

Many central banks have held interest rates at very low levels since the
financial crisis more than a decade ago. That has raised concerns about them
running out of effective tools to combat another downturn.

Central banks have innovated, notably with quantitative easing, buying
financial assets with newly created money, and some have experimented with
interest rates below zero.

Jerome Powell's speech doesn't create new tools. It proposes adapting an
existing one - the inflation target - in a way that could combat what Mr
Powell calls the persistent undershoot of inflation. If inflation were a bit
higher then interest rates would tend to be too. So there would be a bit
more scope to cut rates when the economy hits a bad patch.

Of course the US is in one now due to the pandemic. The approach announced
by Mr Powell couldn't offset a downturn of that magnitude. But it might give
the Fed a little more scope in the future.

Neil Williams, senior economic adviser at Federated Hermes, said that by
pursuing an average, rather than fixed, inflation target, the bank could
allow inflation "to travel beyond its preferred 2% destination before
tightening rates".

"This should give the recovery extra room to breathe. The challenge, though,
will be getting the inflation train to get that far."--bbc

Europe to start Boeing 737 Max test flights

EU aviation regulators have scheduled flight tests for Boeing's troubled 737
Max plane.

The European Union Aviation Safety Agency (EASA) said the tests would take
place in Vancouver, Canada in the week beginning 7 September.

Boeing's best-selling aircraft was grounded last year after two crashes
killed all 346 people on the flights.

The announcement comes two months after US regulators began similar test
flights for the jet.

However, EASA has maintained that clearance by the US Federal Aviation
Administration will not automatically mean a clearance to fly in Europe.

The agency said it had been "working steadily, in close co-operation with
the FAA and Boeing, to return the Boeing 737 Max aircraft to service as soon
as possible, but only once it is convinced it is safe".

It said the process of scheduling the test flights had been hindered by
Covid-19 travel restrictions between Europe and the US

It added: "While Boeing still has some final actions to close off, EASA
judges the overall maturity of the re-design process is now sufficient to
proceed to flight tests. These are a prerequisite for the European agency to
approve the aircraft's new design."

EASA said simulator tests would take place from 1 September at London's
Gatwick airport.

Changes to make

Meanwhile, the FAA has put forward a wide-ranging list of changes it wants
to be made before the planes can fly again commercially.

These include updating flight control software, revising crew procedures and
rerouting internal wiring.

Boeing hopes to get the 737 Max back in the air early next year.

Aviation regulators grounded the 737 Max following two crashes - a Lion Air
flight and an Ethiopian Airlines flight - within five months of each other.

The crashes killed all 346 passengers and crew on the flights.

The ruling triggered a financial crisis at the 103-year-old company, sparked
lawsuits from victims' families and raised questions about how Boeing and
the FAA conducted their safety approval process.

Investigators blamed faults in the flight control system, which Boeing has
been overhauling for months in order to meet new safety demands.--bbc

TikTok boss quits as Trump's ban looms

TikTok chief executive Kevin Mayer has quit after just two months in the job
ahead of an impending ban by US President Donald Trump.

The Chinese-owned firm has been accused of being a threat to US national
security by the Trump administration.

Mr Mayer joined TikTok in June after leaving his role as Disney's head of
streaming services.

TikTok was given 90 days to be sold to an American firm or face a ban in the
US.

"In recent weeks, as the political environment has sharply changed, I have
done significant reflection on what the corporate structural changes will
require, and what it means for the global role I signed up for," Mr Mayer
said in a letter to employees.

"Against this backdrop, and as we expect to reach a resolution very soon, it
is with a heavy heart that I wanted to let you all know that I have decided
to leave the company," Mr Mayer added.

Both TikTok and Chinese messaging app WeChat face bans in the US as tensions
rise between Washington and Beijing over a wide range of issues including
national security concerns about Chinese tech firms.

"We appreciate that the political dynamics of the last few months have
significantly changed what the scope of Kevin's role would be going forward,
and fully respect his decision. We thank him for his time at the company and
wish him well," a spokesman for TikTok said.

Kevin Mayer was brought into TikTok to help give the Chinese-owned app an
American image.

The thinking was that the former Disney man would be able to negotiate with
a tough-on-China Trump administration better than perhaps a Chinese chief
executive and that would help smooth TikTok's path into one of its biggest
markets - the US.

Instead, the intense pressure from the Trump administration on TikTok only
grew.

President Trump claims TikTok is a national security threat because of who
it is owned by, Chinese internet firm ByteDance.

Earlier this month, he signed an executive order that would effectively ban
TikTok's operations in the US if it wasn't sold to another company by mid
September.

All of this is not what Mr Mayer signed up for when he left Walt Disney to
take on the role at TikTok.

And after just two months in the job, he is now departing.

Executive order

President Trump's executive order prohibits transactions with TikTok's owner
ByteDance from mid-September.

The firm has gone to court to challenge the ban.

Officials in Washington are concerned that TikTok could pass American users'
data to the Chinese government, something ByteDance has denied doing.

TikTok said the Trump administration's move was motivated by politics, not
national security.

US tech giant Microsoft has confirmed that it is continuing talks to
purchase the US operations of TikTok.--bbc

Rolls-Royce reports record loss as travel slumps

Engineering giant Rolls-Royce, which makes jet engines, has reported record
losses after the coronavirus pandemic caused demand for air travel to slump.

The firm announced a pre-tax loss of £5.4bn for the first half of this year.

Chief executive Warren East told the BBC he did not expect demand to recover
to late-2019 levels for five years.

On Wednesday, it confirmed the closure of factories in Nottinghamshire and
Lancashire, as part of plans to cut 3,000 jobs across the UK.

The move is part of a previously announced cost-cutting exercise that will
see the company slash its global workforce by a fifth, following the drastic
fall in air travel because of the coronavirus outbreak.

Rolls-Royce is in the middle of its biggest restructuring in its history,
which will reduce the number of sites it has worldwide from 11 to six.

Wide-body engine assembly and testing, which is currently carried out at
three global sites, will be consolidated at its main site in Derby.

Rolls-Royce employs 50,000 people around the world, about half of them in
the UK.

'Ongoing uncertainty'

Mr East told the BBC's Today programme that so far this year, 4,500 people
worldwide had left the company.

He said Rolls-Royce had originally expected to deliver up to 500 jet engines
this year, but would now manage only half that.

Rolls-Royce said it intended to sell its Spanish unit ITP Aero and other
assets to raise at least £2bn.

Rolls-Royce makes money not from the sale of engines, but from their use.
When planes stop flying - as they have done during the pandemic - its
revenues slow to a trickle. It has responded with a swingeing cost-cutting
programme, with 9,000 jobs going.

Despite these self-help measures, Rolls-Royce still made a £1.7bn operating
loss in the first half of the year. But the big hit came from changes it has
been forced to make to its currency hedging programme, which it has in place
to protect it against swings in the value of the US dollar.

The slump in airline flying means it can no longer expect such a large
stream of US dollar revenues, so it has closed off some of its hedge trades
early. The cost is £2.5bn. When you add in other restructuring costs, the
total loss for the six months is £5.4bn,

The big question now is when - and how - Rolls-Royce will shore up its
balance sheet by raising money. It has earmarked £2bn worth of assets for
sale - including Spain's ITP Aero - but that is unlikely to be enough. The
next step is expected to be a rights issue, where existing shareholders pay
for more shares at a discount to the market price. That could bring in
around £2bn, about half the company's current stock market value.

Some analysts think Rolls-Royce will eventually need more - and that a
government intervention cannot be ruled out.

Rolls-Royce said: "In light of ongoing uncertainty in the civil aviation
sector, we are continuing to assess additional options to strengthen our
balance sheet to enable us to emerge from the pandemic well placed to
capitalise on the long-term opportunities in all our markets."

These options could include selling off more divisions, refinancing or even
tapping investors for money through a rights issue, but no decisions have
been taken as yet.

Julie Palmer, partner at Begbies Traynor, said Mr East had faced "a torrid
time" at Rolls-Royce, with problems including design glitches on the Trent
1000 engine.

But she said managing the current Covid-19 crisis would be "his biggest
challenge yet".

She added that there were now "further issues for the business to manage"
after Rolls-Royce said earlier this month that routine inspections of
another engine type, the XWB-84, had uncovered cracks in compressor blades
in a "small number" of examples.

Rolls-Royce said at the time that it did not expect the issue to create
"significant customer disruption or material annual cost".

In its statement on Thursday, Rolls-Royce added that chief financial officer
Stephen Daintith had resigned, but would remain in his role for now to
support an orderly transition.

Mr Daintith will be joining online grocery firm Ocado as its chief financial
officer in November.--bbc

Invest Wisely!

Bulls n Bears 

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INVESTORS DIARY 2020

Company

Event

Venue

Date & Time

SeedCo International

AGM

Virtual (https://eagm.creg.co.zw/eagmzim/Login.aspx#)

26 August 2020 | 9am

SeedCo

AGM

Virtual (https://eagm.creg.co.zw/eagmzim/Login.aspx#)

28 August 2020 | 9am

Companies under Cautionary

Bindura Nickel Corporation

Padenga Holdings

Delta Corporation

Meikles Limited

 <mailto:info at bulls.co.zw> 

DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
Faith Capital (Pvt) Ltd for general information purposes only and does not
constitute an offer to sell or the solicitation of an offer to buy or
subscribe for any securities. The information contained in this report has
been compiled from sources believed to be reliable, but no representation or
warranty is made or guarantee given as to its accuracy or completeness. All
opinions expressed and recommendations made are subject to change without
notice. Securities or financial instruments mentioned herein may not be
suitable for all investors. Securities of emerging and mid-size growth
companies typically involve a higher degree of risk and more volatility than
the securities of more established companies. Neither Faith Capital nor any
other member of Bulls ‘n Bears nor any other person, accepts any liability
whatsoever for any loss howsoever arising from any use of this report or its
contents or otherwise arising in connection therewith. Recipients of this
report shall be solely responsible for making their own independent
investigation into the business, financial condition and future prospects of
any companies referred to in this report. Other  Indices quoted herein are
for guideline purposes only and sourced from third parties.

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<mailto:info at bulls.co.zw> info at bulls.co.zw Tel: +263 4 2927658 Cell: +263 77
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