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COMMODITY NEWSBRIEFS: 25 FEBRUARY 2015 Please note that these articles are available in electronic format and can be requested and delivered via e-Mail.

(http://intra.spoornet.co.za) Natasha.Havenga@transnet.net

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AUTOMOTIVE IMPERIAL’S VEHICLE IMPORT UNIT STALLS IN HALF-YEAR RESULTS (Business Day, 25/2/2015) Imperial Holdings performed to market expectations in deteriorating trading conditions in the six months to December, as the weaker rand depressed margins and affected competitiveness. Group revenue grew 9%, mainly on acquisitions, but operating profit fell by the same percentage in the period. This saw core earnings per share fall 14% in the year, even as cash flow from operating activities rose 73% to R1bn. The vehicle import, distribution and dealership division — which brings in 25% of group revenue and 16% of overall operating profits — saw operating profit dive 51% on the cost of importing vehicles. The group also said it expected earnings for the year to June this year to be below last year’s results. This helped the share fall 5.8% on the day. Imara SP Reid equity analyst Mark Saner said yesterday that while the effects of the weaker rand on the vehicle import division was expected, the weaker performance from the group’s international logistics division and a drop in dividend were not. “With earnings for the full year expected to be below the 2014 level, the sell-off … was not surprising,” Mr Saner said. “We remain positive on the longer-term prospects of the company, but the outlook does not give much hope for any short-term recovery as the weaker rand looks set to continue to hurt the vehicle import division.” Kagiso Asset Management investment analyst Qaqambile Dwayi said yesterday the “results were a mixed bag, with worse-than-expected trading conditions for most divisions”. He said volumes had fallen notably in the South African logistics business, as a result of SA’s ailing manufacturing and mining sectors. Strikes in the mining, transport and metals industries in recent years also contributed to a drop in confidence. “The near-term outlook remains weak and pressure on the vehicle distributorship business continues,” Mr Dwayi said. STEEL METALS, ENGINEERING SECTOR CONTINUES TO FACE HEADWINDS (Engineering News, 25/2/2015) The steel and engineering sector was estimated to have produced R488-billion worth of output during 2014 and added a R117-billion of value to the economy, Steel and Engineering industries Federation of Southern Africa (Seifsa) chief economist Henk Langenhoven said on Tuesday. Speaking at the Seifsa Analysis of Anticipated Social, Political, Economic and Labour Trends seminar for 2015, he noted that employment in the sector, where 398 000 people were formally employed, was fairly stable. “[Last year] was a disappointing year. It was expected that growth would resume after the 2% contraction during 2013 but the hope of continued domestic and international recovery at the beginning of the year faded during 2014,” he commented. He further pointed out that this meant that production levels were still 25% to 30% lower than the sector’s 2007

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peak. Employment and profitability had declined, while capacity utilisation remained below optimum. “Without demand or the prospects of growth in demand and idle production capacity, profits do not materialise and little investment takes place. There also seems to be more uncertainty around current and prospective economic growth in the global economy than a year ago,” Langenhoven noted. He explained that, as a result, there was a slowdown in demand and South African exports seemed to have lost market share in international markets during the upheaval in the aftermath of the financial crisis. The most prominent theme in terms of price movements during 2014 had been the downward spiral in commodity prices, producer prices and consumer prices. He noted that 2014 began with domestic inflationary pressures averaging 10%, primarily driven by the prior weakening of the exchange rate. Following the first quarter, the trend had been deflationary to the end of 2014. He added that input cost pressures, the weak global economy, the fall in international commodity prices, the weak domestic economy and prolonged strike action disrupting production had driven down costs. “We anticipate this deflationary pattern in steel and production prices [to] last into 2015,” he concluded. TIMBER, PAPER, PUBLISHING PACKAGING PAPER DRIVES 10% FY PROFIT GAIN FOR MONDI (Engineering News, 25/2/2015) While Mondi’s revenue for the year ended December 31, at €6.4-billion, remained largely unchanged year-on-year, the international paper and packaging group succeeded in lifting overall profit 10% to €767-million for the 12 months, leveraging strongly off acquisitions and a solid showing by the group’s packaging paper division. Cash generated from operations of €1.03-billion was broadly in line with 2013, despite an increase in working capital of €87-million. Excluding the impact of acquisitions, working capital accounted for 12.3% of revenue, marginally above the group’s targeted 10% to 12% range. CEO David Hathorn said that the company’s financial performance validated its emerging market- and packaging-focused strategy. “Clearly packaging [paper] is the right space to be in in terms of the product mix that we have. We continue to enjoy structural growth for those products and [will continue to] focus on emerging markets, particularly in Central and Eastern Europe, which continue to enjoy higher growth rates than mature markets. “I do believe that the 2014 [results are] a verification that the strategy has been correct in terms of where we deployed capital and how we’ve deployed capital – both from a product and geographic perspective,” he commented. Looking to the future, Hathorn said economic growth was expected to remain below historical averages in the regions in which Mondi operated. “We expect this slow economic growth to continue to impact on demand for our products in the short term, although underlying industry fundamentals remain generally sound, with supply/demand balance supported by supply-side constraint,” he commented. Recent exchange rate movements provide a mixed impact, although with a “clearly positive” bias when considered for the group as a whole. “Furthermore, the recently completed capital investments and ongoing projects should contribute meaningfully to Mondi’s future performance. As such, management is confident that the company will make further progress in the year ahead,” he concluded. MINERAL MINING SOUTH AFRICA DROPS OUT OF TOP 10 IN AFRICA FOR MINING INVESTMENT (Mining, 25/2/2015) According to the latest annual global survey released Tuesday by Canadian think tank the Fraser Institute, South Africa has fallen out of the top ten mining investment destinations on the continent and dropped 11 places to 67th globally. The institute's Annual Survey of Mining Companies 2014, rates 122 jurisdictions around the world based on their geologic appeal and the extent to which government policies encourage exploration and investment. "While it is useful to measure the attractiveness of a jurisdiction based on policy factors such as onerous regulations, taxation levels, the quality of infrastructure and so forth, investment decisions are often based on the pure mineral potential of a jurisdiction. Indeed respondents consistently indicate that roughly only 40% of their investment decision is determined by policy factors," according to the report. An unprecedented five-month wage strike by platinum mine workers dragged growth down to 1.5% for the year. The survey covers Central African Republic, Egypt, Lesotho, Mauritania, Morocco, South Sudan, Sudan, and Uganda for the first time, but it's at the top of the rankings that trends are most visible. And it's not encouraging for the continent's long-time stalwart. South Africa is ranked the 11th most attractive African destination for investment in the resources sector behind the Democratic Republic of the Congo. Troubles in the mining sector is also reflected in the country's broader economic performance. GDP growth in 2014 was the lowest for South Africa in five years. An unprecedented five-month wage strike by platinum mine workers, followed by another prolonged strike by more than 220,000 metalworkers and engineers, dragged growth down to 1.5% for the year. Comments on the state of mining in South Africa

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from the Frasier Institute survey also point to labour and power as central concerns: "Highly political unionized workforce that perpetually demands more and more in return for less and less productivity "Inadequate power generation and inadequate labour laws regarding mineral sector strikes." Namibia is the top ranked destination in Africa and 25th overall edging out jurisdictions like Queensland in Australia, British Columbia in Canada and Colorado in the US. The country showed improvement on its policy factors and moved up to a ranking of 20th in 2014 from 34th in 2013 based on its legal and tax environment and other factors such as infrastructure and costs. SOUTH32 CATALYST FOR NEXT WAVE OF PRODUCTIVITY GAINS – BHP BILLITON (Mining Weekly, 25/2/2015) Mining giant BHP Billiton, which pulled a free cash flow rabbit out of the thrashed commodity price hat in the six months to December 31, intends the spinoff of South32 to be the catalyst for the new wave of productivity gains in the period ahead “because if you keep doing the same thing, you eventually run out of options”, the company said on Tuesday. In South32, BHP Billiton intends demerging some of its aluminium, coal, manganese, nickel and silver assets, worth an estimated $16-billion, into the company that will be listed in Australia, UK and South Africa. Simplifying materially through the South32 restructure would be the catalyst for the next wave of productivity management. Despite being thrashed by decimated iron-ore, oil and copper prices, the diversified major managed to check the lower prices and translate the result into increased free cash flow. The company, headed by CEO Andrew Mackenzie, lifted free cash flow by a high 23% to $4.1-billion to keep its A+ credit rating as well as maintain its progressive dividend policy with a payout of $3.2-billion. South32 would have its own dividend policy and, in the event of South32 declaring a dividend, that dividend would be on top of the progressive dividend that BHP Billiton was itself committed to continue paying out. The majority of South32’s selected assets are located in the southern hemisphere, with its two regional centres of Australia and South Africa linked by the thirty-second parallel south line of latitude, the company’s name representing this footprint and regional approach to managing its operations. The simplified BHP Billiton would itself retain a 9% shareholder base in South Africa where it would continue to explore for oil and gas off South Africa’s West Coast, while South32 CEO-designate Graham Kerr has outlined that the new, demerged entity would set up a global shared service centre in South Africa that would create 200 new South African jobs. South32’s new board and the leadership would have strong South African representation with the African business being run out of Johannesburg, with more power devolved under the regional model. A R10-billion, five-year liquid metal supply contract South32 has struck with a black-controlled consortium, Isizinda Aluminium, will also give the South African aluminium industry a shot in the arm. BHP POSTS BIG DROP IN HALF-YEAR PROFIT, CUTS BACK ON SPENDING (Mining Weekly, 25/2/2015) Mining giant BHP Billiton on Tuesday said that its interim profit had nearly halved, as the prices of the group’s main commodities slumped in the past six months. BHP posted a 47.4% year-on-year decline in group profit for the half-year ended December 31, to $4.27-billion, from $8.12-billion a year earlier. Revenue dropped by 11.9% year-on-year to $29.9-billion. The underlying attributable profit declined by 31% to $5.35-billion. The group is offsetting the lower commodity prices by reducing its capital and exploration expenditure and by increasing its focus on efficiency. BHP announced on Tuesday that it would cut back on capital spending even more in the 2015 financial year, slashing its guidance by 15% to $12.6-billion. GENERAL SA ECONOMY GREW 1.5% IN 2014 (Engineering News, 25/2/2015) South Africa’s gross domestic product (GDP) grew by a meagre 1.5% in 2014, lower than the 2.2% growth of 2013 and well below the 5.5% growth target set out by government in its National Development Plan. The main contributors to the increase in economic activity in 2014 were general government services, contributing 0.5 of a percentage point; and the finance, real estate and business services, contributing 0.4 of a percentage point. However, the mining and quarrying industry made a negative 0.1 percentage-point contribution for the full year. Stats South Africa (SA) further revealed that GDP had expanded by 4.1% quarter-on-quarter in the three months to December 31, with the nominal GDP estimated at R979-billion for the quarter – R16-billion higher than in the third quarter of the year. The main contributors to GDP growth for the quarter were the manufacturing industry, contributing 1.2 percentage points, based on growth of 9.5%, followed by the mining and quarrying industry, which contributed 1.1 percentage points. The third-biggest contributor to GDP during the quarter was the finance, real estate and business services sector, which contributed 0.7 percentage points. Despite the sharp rebound in the mining industry, with 15.2% growth experienced in this quarter, the sector still had lower seasonally adjusted quarterly value than it had in 2005, contributing only R227-billion, compared with the R246-billion it

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recorded then. It is, however, a significant increase from the R218-billion it contributed in 2009. Meanwhile, the manufacturing sector grew by 9.5% in the fourth quarter. Speaking to Engineering News Online, Stats SA executive manager: national accounts Gerhardt Bouwer said the growth was bolstered by the industrial strikes in the mining industry coming to an end. “When there were ongoing strikes in the platinum, gold and coal sectors, the manufacturing sector’s growth tapered.” He illustrated that for the first three quarters of 2014, the manufacturing sector had recorded quarter-on-quarter contractions of 6.4%, 4% and 1% in the seasonally adjusted real annualised change. Nomura analyst Peter Attard Montalto warned that the 2015 first quarter GDP figures were likely to be negatively impacted by the regular load shedding implemented by electricity utility Eskom. “However, we think [the fourth-quarter GDP data] does reinforce the theme that South Africa is not currently suffering from a massive output gap and that normalisation is still the operative word for the Monetary Policy Committee as core inflation remains sticky,” he added. Meanwhile, BNP Paribas Cadiz Securities economist Jeffrey Schultz noted that it was “clear from the year-on-year growth breakdown” that the services sector remained the backstop to overall economic growth and activity. “With security of electricity supply becoming more tenuous, the risk of further strike activity flaring up later this year and persistently weak demand and activity conditions, the outlook for domestic growth remains riddled with obstacles. We, therefore, maintain our below consensus 2% growth forecast for 2015,” he added. CURRENCIES AND PRICES

ALSI: 3 mnth to 24 Feb 15

(Mail & Guardian, 25/2/2015)

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JSE AS AT 17:00PM 24 FEBRUARY 2015

All Share Index 24/02 53,375

+ 38.42 + 0.07%

Industrials Index 24/02 48,086

- 549.73 - 1.13%

Financials Index 24/02 44,084

+ 129.04 + 0.29%

Top 40 Index 24/02 47,178

+ 15.26 + 0.03%

Industrial 25 Index 24/02 66,540

- 291.41 - 0.44%

Financial 15 Index 24/02 16,878

+ 28.04 + 0.17%

Resources 10 Index 24/02 45,587

+ 563.46 + 1.25%

Alt-X Index 24/02 1,490

- 4.78 - 0.32%

WORLD INDICATORS

FOREX

Rand/Dollar 06:30 11.4827

- 0.14 - 1.21%

Rand/Pound

06:30 17.7354

- 0.20 - 1.12%

Rand/Euro 06:30 13.0230

- 0.16 - 1.19%

COMMODITIES

Gold (usd/oz) 06:30 1,208.32

+ 5.52 + 0.46%

Platinum (usd/oz)

06:30 1,173.88

+ 13.88 + 1.20%

Brent (usd/barrel) 06:30 58.87

- 0.03 - 0.05%

WORLD MARKETS

Wall St (DJIA) 24/02 18,209

+ 92.35 + 0.51%

Germany (DAX)

24/02 11,206

+ 155.10 + 1.40%

Japan (Nikkei) 06:30 18,606

+ 138.67 + 0.75%

(Business Report, 25/2/2015) COPPER A – SETTLEMENT PRICE – N/A FORWARD RATES - Dollar/rand 4pm close: N/A

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(TFR Commercial Management: Business Performance Dept)

Petrol/ Diesel Price

YR2015

07-Jan-

15

04-Feb-

15

04-Mar-

15

01-Apr-

15

06-May-

15

03-Jun-

15

01-Jul-

15

05-Aug-

15

02-Sep-

15

07-Oct-

15

04-Nov-

15

02-Dec-

15

COASTAL

95 LRP (c/l) 1083.00 990.00

95 ULP (c/l) 1083.00 990.00

Diesel 0.05% (c/l) 997.49 895.49

Diesel 0.005% (c/l) 1001.89 899.89

Illuminating Paraffin (c/l) 697.728 595.728

Liquefied Petroleum Gas

(c/kg) 1829.00 1679.00

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GAUTENG

93 LRP (c/l) 1102.00 1009.00

93 ULP (c/l) 1102.00 1009.00

95 ULP (c/l) 1124.00 1031.00

Diesel 0.05% (c/l) 1028.09 926.09

Diesel 0.005% (c/l) 1032.49 930.49

Illuminating Paraffin (c/l) 747.928 645.928

Liquefied Petroleum Gas

(c/kg) 2011.00 1861.00

YR2014

01-Jan-

14

05-Feb-

14

05-Mar-

14

02-Apr-

14

07-May-

14

04-Jun-

14

02-Jul-

14

06-Aug-

14

03-Sep-

14

01-Oct-

14

05-Nov-

14

03-Dec-

14

COASTAL

95 LRP (c/l) 1320.00 1359.00 1395.00 1398.00 1383.00 1361.00 1392.00 1392.00 1325.00 1320.00 1275.00 1206.00

95 ULP (c/l) 1320.00 1359.00 1395.00 1398.00 1383.00 1361.00 1392.00 1392.00 1325.00 1320.00 1275.00 1206.00

Diesel 0.05% (c/l) 1260.55 1284.75 1311.95 1299.15 1269.37 1245.79 1259.79 1254.17 1228.79 1215.79 1154.79 1101.49

Diesel 0.005% (c/l) 1263.95 1288.15 1316.35 1304.55 1274.77 1249.19 1263.19 1258.57 1234.19 1221.19 1161.19 1106.89

Illuminating Paraffin (c/l) 963.828 975.828 991.828 953.028 934.028 924.028 947.028 940.028 921.028 907.028 855.028 805.728

Liquefied Petroleum Gas

(c/kg) 2260.00 2314.00 2372.00 2350.00 2346.00 2319.00 2377.00 2365.00 2257.00 2269.00 2164.00 2039.00

GAUTENG

93 LRP (c/l) 1336.00 1375.00 1411.00 1416.00 1401.00 1379.00 1408.00 1408.00 1341.00 1343.00 1298.00 1229.00

93 ULP (c/l) 1336.00 1375.00 1411.00 1416.00 1401.00 1379.00 1408.00 1408.00 1341.00 1343.00 1298.00 1229.00

95 ULP (c/l) 1357.00 1396.00 1432.00 1439.00 1424.00 1402.00 1433.00 1433.00 1366.00 1361.00 1316.00 1247.00

Diesel 0.05% (c/l) 1287.15 1311.35 1338.55 1329.75 1299.97 1276.39 1290.39 1284.77 1259.39 1246.39 1185.39 1132.09

Diesel 0.005% (c/l) 1290.55 1314.75 1342.95 1335.15 1305.37 1279.79 1293.79 1289.17 1264.79 1251.79 1191.79 1137.49

Illuminating Paraffin (c/l) 1009.728 1021.728 1037.728 1003.228 984.228 974.228 997.228 990.228 971.228 957.228 905.228 855.928

Liquefied Petroleum Gas

(c/kg) 2442.00 2496.00 2554.00 2532.00 2528.00 2501.00 2559.00 2547.00 2439.00 2451.00 2346.00 2221.00

(SAPIA online)

Daily prices for 24 February 2015

LME Official Prices, US$ per tonne

Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 1785.00 1791.00 5710.00 1761.50 14245.00 18090.00 2049.00 1970.00

Cash Seller & Settlement 1795.00 1792.00 5715.00 1762.00 14250.00 18095.00 2050.00 1975.00

3-months Buyer 1800.00 1808.00 5709.50 1779.00 14290.00 18100.00 2063.00 1985.00

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Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

3-months Seller 1810.00 1809.00 5710.00 1781.00 14300.00 18125.00 2065.00 1990.00

15-months Buyer 18175.00

15-months Seller 18225.00

Dec 1 Buyer 1800.00 1878.00 5680.00 1825.00 14395.00 2093.00 2040.00

Dec 1 Seller 1810.00 1883.00 5690.00 1830.00 14495.00 2098.00 2050.00

Dec 2 Buyer 1923.00 5665.00 1850.00 14345.00 2080.00

Dec 2 Seller 1928.00 5675.00 1855.00 14445.00 2085.00

Dec 3 Buyer 1968.00 5655.00 1853.00 14295.00 2068.00

Dec 3 Seller 1973.00 5665.00 1858.00 14395.00 2073.00

(London Metal Exchange, 25/2/2015)

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