P&G beats earnings estimates despite rising cost pressures

Market Commentary

South African Market Summary

South African equities declined on Thursday, with the JSE All Share losing 1.03% to 108,525.49 and the Top 40 falling 1.18% to 100,543.39. Exports to China increased by nearly 25% year on year between May and August following Beijing’s zero-tariff scheme for qualifying African exports, while imports rose 23%. Authorities continued efforts to rebalance trade with South Africa’s largest trading partner. Separately, the Reserve Bank’s draft Synthetic Financial Centre framework would allow approved local institutions to manage qualifying foreign portfolios without those investments counting towards their own offshore limits. Clicks reported turnover growth of 5.4% and HEPS growth of 4.4%, but shares fell 3.56%. Afrimat declined 5.88% after reporting a headline loss and declaring no interim dividend amid iron ore and cement pressures.

European Market Summary

European equities recorded their steepest decline in three weeks on Thursday, with the STOXX 600 falling more than 1% to 637.74 as higher oil prices and French fiscal concerns weakened sentiment. Eurozone banks declined by 4.2%, their worst session since March. French 10-year bond yields exceeded 5%, reaching a 24-year high, while the premium over German Bunds approached 180 basis points amid strained public finances and continuing protests. The sell-off raised concerns about borrowing costs across indebted regional economies. Barclays announced approximately 5,000 job cuts as quarterly profit rose 12% to £2.3 billion but missed expectations. LSEG agreed to acquire Octus for $3.54 billion, expanding its data offering, while Nestlé exceeded quarterly sales forecasts on stronger volumes and maintained annual guidance.

US Market Summary

US equities fell on Thursday as high-profile earnings reports renewed concerns over artificial intelligence spending, with semiconductor weakness driving the Nasdaq’s 2.6% decline, its steepest daily fall since early June. The S&P 500 also retreated sharply, while the Dow edged higher. Initial unemployment claims dropped towards 57-year lows, signalling limited layoffs and potential improvement in October employment growth. Strong corporate profits, resilient domestic demand and a smaller workforce continued to support labour-market stability despite the oil-price shock. However, economists warned that tighter financial conditions and higher interest rates linked to prolonged Middle East tensions could weaken employment next year. Procter & Gamble exceeded earnings expectations but increased its projected annual profit impact from higher input and logistics costs to $1.4 billion; shares gained 5.58%.

Asian Market Summary

Asian shares declined on Friday as concerns over the funding requirements of artificial intelligence investment weighed on technology stocks, prompting investors to seek government bonds and defensive currencies. US Treasuries recorded their strongest daily rally in more than three years. Japan’s manufacturing expansion slowed to a seven-month low in October, with the flash manufacturing PMI falling to 53.3 from 54.1 in September. Output and new orders grew at their weakest rates since March, while private-sector export business recorded its slowest increase in four months. Economy Minister Minoru Kiuchi said conditions were insufficient to declare an official end to deflation, stressing the need to avoid renewed persistent price declines. Separately, HD Hyundai agreed a partnership with Kiewit targeting a new US shipyard and approximately 3,000 jobs.

Commodity Market Summary

Oil prices steadied in early Asian trade on Friday after gaining 4% in the previous session as Houthi attacks on Saudi Arabia heightened supply concerns. Brent was heading for a third consecutive weekly gain, while WTI was set to end two weeks of advances. Saudi Aramco ordered the evacuation of its Dhahran headquarters as fighting intensified, underscoring risks to regional production and shipping routes. Libya faced further supply disruption after a pipeline valve closure reduced output at the Hamada and Tahara oilfields. Meanwhile, prospective US-mediated negotiations between Russia and Ukraine in November remained relevant to the outlook for sanctioned Russian energy supplies. Gold attracted little defensive demand despite geopolitical uncertainty, holding at $4,021.99 an ounce after falling nearly 3% overnight.

Currency Market Summary

The rand weakened on Thursday as higher oil prices pressured South Africa’s fuel-importing economy, while investors assessed the mid-year budget’s temporary fuel levy relief. On Friday, the yen reached its strongest level in over a month as concerns about AI spending triggered defensive flows and pushed the dollar towards a three-week low. The dollar index stood at 101.52, while US 10-year Treasury yields hovered near a one-month low of 4.953%. Growth concerns outweighed inflation risks despite Brent remaining above $110 per barrel. Japan’s September core inflation exceeded the Bank of Japan’s 2% target for the first time in nine months, strengthening the case for tighter policy. Most economists expect unchanged rates next week, followed by a quarter-point increase in December.

Domestic Company News 

Clicks Group Limited (CLS) -3.56%
Clicks Group reported turnover growth of 5.4% to R50.4 billion for the year ended 31 August 2026, despite constrained consumer spending and aggressive discounting. Headline earnings per share increased by 4.4% to 1 422 cents, while the total dividend rose by 4.4% to 925 cents per share. Group trading profit increased by 4.7% to R4.9 billion, although the trading margin narrowed by 10 basis points to 9.7%. Retail trading profit grew by 9.9%, while UPD’s declined by 10.4%, reflecting distribution contract losses and a lower price adjustment. Operating cash generation reached R6.3 billion, with R3.4 billion returned to shareholders. Clicks expanded its pharmacy market share to 24.7%. Management plans 40–50 new stores and R1.5 billion in capital expenditure for 2027, despite continued competitive pressure.

Cashbuild Limited (CSB)-2.50%
Cashbuild reported revenue growth of 1% for the first quarter of its 2027 financial year, as new stores offset weaker existing operations. Revenue from 304 existing stores declined by 4%, while 14 new stores contributed 5% growth. Comparable store revenue decreased by 1%. Group transactions fell by 3%, with existing stores recording a 4% decline and new stores contributing 1% growth. Selling inflation reached 3.1% at September 2026. Cashbuild South Africa, accounting for 81% of sales, recorded a 2% revenue decline. Rest of South Africa revenue increased by 56%, largely driven by new stores, while Rest of Africa revenue declined by 11%. The group opened two stores, closed one and refurbished three, ending the quarter with 318 stores.

Afrimat Limited (AFT) -5.88%
Afrimat reported a headline loss of 58.0 cents per share for the six months ended 31 August 2026, compared with headline earnings of 101.9 cents previously. Revenue declined by 4.3% to R5.1 billion, while operating profit fell by 32.8% to R255.2 million, including a once-off disposal profit of R95.5 million. Bulk Commodities operating profit dropped to R8.6 million from R445.1 million, reflecting pressure on iron ore profitability, while Cement’s operating loss widened to R146.1 million. Strong Aggregates performance provided a partial offset. Cash generated from operations increased by 21.1% to R433.1 million, helping reduce net debt to R2.1 billion. No interim dividend was declared. Management prioritises cash generation, debt reduction and operational reliability, with improved clinker availability and lower-cost iron ore production expected to support recovery.

Pick n Pay Stores (PIK) +1.10%
Pick n Pay expects its headline loss per share for the 26 weeks ended 30 August 2026 to narrow by 25%–35% to 38.85–44.83 cents, from 59.77 cents previously. The loss per share is expected to decrease by 40%–50% to 33.77–40.52 cents, compared with 67.53 cents. The improvement reflects trading profit growth at Boxer and a moderately reduced trading loss in the Pick n Pay segment. Management cautioned that the percentage improvement partly reflects the relatively small comparative headline loss of R439 million. Separately, Pick n Pay reached a store labour agreement with SACCAWU and formally withdrew its Section 189A consultation process. Further details will accompany interim results on 26 October 2026.

Quilter plc (QLT) +1.16%
Quilter reported third-quarter core net inflows of £2.9 billion, taking the year-to-date total to £8.9 billion, up 31% year on year and approaching the £9.1 billion achieved in 2025. Assets under Management and Administration increased 19% year on year to £160.5 billion. Platform net inflows reached £8.0 billion year to date, with quarterly inflows rising 25% to £2.6 billion. Quarterly Platform inflows from independent advisers increased 33%, while those from Quilter advisers rose 10%. High Net Worth quarterly net inflows increased 35% to £322 million, equivalent to 4% of opening assets on an annualised basis, reflecting strengthening momentum. Core business persistency remained strong at 91% year to date, while Quilter adviser productivity improved 9% year on year in the third quarter.

Global Company News

Procter & Gamble Company (PG) +5.58%
Procter & Gamble reported first-quarter net sales growth of 4% to $23.28 billion, exceeding expectations of $22.80 billion, while core earnings of $2 per share beat estimates of $1.88. Overall volumes increased by 2.4%, supported by resilient beauty and home-care demand, while prices rose approximately 0.4%. However, the company raised its estimated fiscal 2027 profit impact from higher raw material, energy and freight costs to $1.4 billion from $1 billion. Core operating margin declined by 80 basis points despite 250 basis points of productivity savings. Management expects commodity pressures to intensify over the next two quarters but maintained annual guidance for organic sales growth of 1%–3% and core earnings of roughly $7 per share, balancing pricing increases against pressure on household budgets.

Lockheed Martin Corporation (LMT) +6.96%
Lockheed Martin raised its annual forecasts and announced a framework agreement covering at least 850 F-35 fighter jets for the Pentagon over 10 years, worth at least $78 billion. The agreement requires congressional approval and does not constitute a sales order. Quarterly sales rose 11% to $20.71 billion, exceeding estimates of $20.51 billion, while earnings of $7.97 per share beat expectations of $7.43. Missiles revenue increased by 24% and aeronautics revenue by 13%. Backlog climbed 27% sequentially to a record $292 billion, supported by a $52.5 billion interceptor award. Management now expects 2026 sales of $80 billion–$82 billion, earnings of $30.35–$30.75 per share and free cash flow of $7.8 billion–$8 billion. Lockheed will self-fund at least $7 billion in F-35 programme initiatives.

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