As­cendis share­hold­ers must be rather bil­ious

Business Day - - THE BOTTOM LINE -

Share­hold­ers in health-care con­glom­er­ate As­cendis must be feel­ing rather queasy at this point.

Since Au­gust the share price has more than halved, which, at the time of writ­ing, was a new low for As­cendis.

In the year to date, As­cendis has shed more than 60% of its value and now looks noth­ing like the mar­ket dar­ling whose ac­quis­i­tive ex­ploits helped to drive the share price to as high as R28 in late 2016.

Like so many other growthby-ac­qui­si­tion coun­ters, the cen­tre sim­ply did not hold as firmly as ex­pected when op­er­a­tional strains in­creased.

But the pale share price prob­a­bly af­fords brave in­vestors an op­por­tu­nity to back a turnaround ef­fort in its early stages.

Nor­malised earn­ings for the year to end-June were re­flected as R738m, com­pared with Thurs­day’s mar­ket cap­i­tal­i­sa­tion of just over R3bn.

As­cendis has al­ready sig­nalled an in­ten­tion to sim­plify its breadth and scale in ar­eas where it has a sus­tain­able com­pet­i­tive ad­van­tage.

This might not be a quick fix, though. Pre­sum­ably a good num­ber of as­sets and brands will need to be sold off, and it will be in­ter­est­ing to see what prices can be gar­nered in the pre­vail­ing dour eco­nomic clime.

In the mean­time, spare a thought for Coast2Coast (C2C), the ma­jor share­holder in As­cendis, which backed a rights of­fer at R20/share in late 2017. As­cendis share­hold­ers will be hop­ing C2C — which pre­sum­ably has sig­nif­i­cant gear­ing at­tached to its share­hold­ing — can en­dure the re­cu­per­a­tion process.

A big seller in the mar­ket is the last thing As­cendis needs right now.

The lat­est min­ing data from Statis­tics SA un­der­lines the dif­fi­cul­ties in SA’s gold sec­tor, which posted the largest fall in pro­duc­tion of all the coun­try’s min­er­als.

The data for Septem­ber showed a 1.8% fall year on year, with a 19% fall in gold out­put com­pared with the same pe­riod a year ear­lier, more than off­set­ting a 7% in­crease in plat­inum group met­als (PGMs).

Min­eral sales, an im­por­tant el­e­ment in SA’s eco­nomic lifeblood, dropped by 3.6%, with gold fall­ing nearly 54%, out­weigh­ing large and pos­i­tive con­tri­bu­tions from PGMs, coal and man­ganese.

SA’s im­por­tance as a source of world gold has dwin­dled in re­cent years, as it fell to eighth place from its dom­i­nant po­si­tion for decades.

Har­mony Gold has spo­ken of clos­ing old mines over the next five years. An­gloGold Ashanti, once the driv­ing force in SA’s gold in­dus­try, has sold and shut mines and is now down to a sin­gle un­der­ground mine and a tail­ings re­treat­ment op­er­a­tion.

Sibanye-Still­wa­ter, SA’s largest source of do­mes­tic gold, re­ported a tough nine months at its gold mines af­ter seis­mic events and other safety in­ci­dents re­sulted in the deaths of more than 20 peo­ple in the first half of the year.

Pan African Re­sources is wind­ing down its Evan­der gold mine as its fo­cus switches to treat­ing tail­ings.

The drop in the sales rev­enue gen­er­ated by gold, to just un­der R4bn in Septem­ber, put the me­tal in dan­ger of be­ing over­taken by iron ore and man­ganese sales.

Gold is a far dis­tant third to the rev­enue gen­er­ated by coal and plat­inum of R12.3bn and R10.5bn, re­spec­tively.

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