SAAonly needs final approval to cancel Airbus deal
NATIONAL airliner SAA is close to cancelling an order for 10 Airbus Group A320 planes, a move that would save the unprofitable state-owned carrier about R1.4 billion in writedown charges.
“We have got all the approvals in place,” chief financial officer Wolf Meyer said yesterday. “We just need to get final approval from the board.”
That would probably come within days, he said.
SAA ordered 15 of the narrow-bodied A320 planes in 2002 and another five in 2008. Price escalation clauses in the contracts meant the carrier had to write down the value of planes delivered so far by about $10 million (R133.21m) each, contributing to consecutive years of losses. The airline is cutting costs and searching for a new chief executive as it seeks to return to profit.
Instead of buying the A320 planes, the carrier plans to lease five larger Airbus A330 models, which will reduce fuel costs and be used on routes to the Middle East. The first delivery is scheduled for the second quarter of next year.
SAA obtained a guarantee from the National Treasury to continue as a going concern even as net losses widened to R2.55bn for the year to March 2014. Results for the year to March this year are due to be released next month. A recruitment company has been appointed to find a new chief executive and a candidate should be identified by the end of the year, spokesman Tlali Tlali said yesterday.
SAA has cut costs by R2.2bn over the past three years and plans further savings of more than R2bn by 2018, Meyer told members of Parliament’s finance committee. While the carrier is benefiting from lower fuel prices, which account for about 35 percent of costs, a slump in the value of the rand against the dollar has eroded the benefit.
SAA chairwoman Duduzile Myeni told lawmakers that pilots’ salaries amounted to almost R2bn a year and together with financing and plane lease costs were a major drain on the carrier’s finances. Lawmakers accused Myeni and SAA’s management team of failing to adequately answer questions or spell out what was being done to restore the carrier to profit and instructed them to reappear before the committee within a few weeks.
“There isn’t sufficient recognition of the gravity of the challenges you are facing,” said Yunus Carrim, a lawmaker for the ANC, who chairs the finance committee. – Bloomberg STRONG trading in Delta Corporation, Econet Wireless and Innscor Africa on the Zimbabwe Stock Exchange (ZSE) was not enough to avert a $1.7 billion (R22.6bn) decline in market capitalisation on the Zimbabwean bourse, with analysts warning that there was “no growth catalyst” for local stocks at the moment.
The ZSE has huffed and puffed along, dragged down by negative investor sentiment over declining economic fundamentals. However, a few companies have remained attractive to foreign investors seeking longer-term exposure to the country, pushing turnover in telecoms group Econet Wireless to lead with shares worth $5.4 million traded during August, followed by SABMiller Zimbabwe unit, Delta Corporation, in which investors traded $4.7m in shares.
Fast consumer goods and fast foods chain, Innscor – which runs Nando’s and Chicken Inn counters in the country – traded $1.4mworth of shares on the ZSE.
There was also strong trade in manufacturing concern, Turnall, as well as in giant retailer, OK Zimbabwe, which competes with Pick n Pay branded stores in the country.
Market traders said listless financial performances by listed companies was subduing interest in stock market trading, while dividend payment would be under pressure should the economy continue to struggle.
“It’s a difficult environment and the fundamentals do not favour any immediate comeback. The decline for the year to August is a strong enough signal that interventions on the policy front are needed while we also need to fix fears of investors and restore certainty to investments,” said one trader.
Turnover down
However, the overall market capitalisation for the ZSE during the month of August is 32.69 percent down at $3.5bn, a $1.7bn decline from last year’s August $5.2bn in market capitalisation. Total turnover of $172m for the eight months to August is also down 47.23 percent from the $326m turnover of last year.
“At the moment local stocks don’t have a clear growth catalyst. News that most big cap companies, such as Delta and Econet, are looking at streamlining operations points towards tough trading conditions in the economy with very few opportunities for growth.
“A total $15.2m worth of shares were traded during the period under review. This is the second lowest turnover for the year after $14.5m was traded in June,” said Kudzanai Sharara, research analyst at Lynton Edwards Securities in Harare.
The main industrial index on the Zimbabwean stock market had shed 5.25 percent to 135.43 points by the end of last month, while the mining index tumbled 10.21 percent to 35.34 points.
August represented the industrial index’s lowest point in the past three years after it sagged to 132.82 points on September 3, 2012.
Companies and businesses, especially those in the productive sectors of mining and manufacturing are bracing for further slowdown in output after the state power utility said this week that it was slowing down power generation owing to scheduled annual maintenance at power plants.
Last week, the state power producer cut production from the Kariba hydropower plant by 30 percent.
“A total of 19 stocks closed in red while 13 traded positive during the period under review,” Lynton Edwards said in a review of the ZSE for the month of August.