Sibanye must be able to pull Lonmin out of fire

Just how stretched Lonmin’s financials are was exposed on Monday when it released results delayed since November.

In August, Lonmin unveiled plans to restructure its business, bringing in buyers for some of its assets, partners for others and selling part of its smelting and refining capacity. This move — endorsed by the company’s lenders, which waivered conditions in their debt covenants — forced Sibanye-Stillwater’s hand in making an all-share takeover bid for the platinum miner.

Sibanye had wanted to wait a while longer, letting Lonmin close old shafts and cut jobs, but it did not want the company broken up, the asset base dispersed and the crown jewels, the smelting and refining business, invaded by third parties.

Now that Sibanye has made its intentions clear, the lenders have extended their waiver until February 2019, the date by which the takeover bid must be concluded. But it has come at the cost of freezing loans and cancelling debt structures.

While Lonmin CE Ben Magara put on a brave face at the results presentation and flagged all the positives he could find, the company’s auditors have flagged concern about whether Lonmin is a going concern. The $1.05bn impairment swung its tangible net worth to $674m, far below the $1.1bn lenders stipulated in their nowsuspended covenants.

It’s in no one’s interests for Lonmin to fail. It employs nearly 33,000 people. The government pension fund manager, the Public Investment Corporation, holds 29% of the company. Communities around Lonmin’s operations are volatile as it is. They won’t need much stimulus to tip into disruptive behaviour and violence. The Sibanye deal must succeed.

Clothing retailer Truworths has not yet managed to turn around its struggling business, even though analysts are upbeat that the strong momentum created during the festive-season sales will continue for most retailers into 2018.

With its sales growth lagging that of peers in SA, the retailer’s international expansion has not been firing on all cylinders. Truworths’s share price is down 1.17% so far in 2018.

At the heart of the retailer’s woes, analysts agree, is its high pricing points and outdated fashion styles.

In the age of fast fashion, international retailers churn out fashion ranges on a bi-weekly to monthly basis, whereas Truworths can take six months to a year to clear shelves and introduce new stock.

Unlike its rivals, Truworths has struggled to grow cash sales, suggesting it is losing market share. About 70% of its revenue in SA is generated through credit sales and that segment of the market has been the weakest in SA for a number of reasons, including the enforcement of the National Credit Act.

All the while, other clothing retailers are growing cash sales at exciting rates.

With cash-strapped consumers and disposable incomes under pressure, relief on the credit side would go a long way to pushing up Truworths sales.

But the jury is still out on whether this retailer will be able to recover and start giving its competitors a run for their money. Some analysts think that Truworths, like Woolworths’s David Jones brand, will have to improve its outdated fashion styles and pricing if it hopes to stand a chance of attracting more consumers and gaining market share.