42 of 2020

            

                                                              Newsletter No. 42 / 6 November 2020                            

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Sappi Verve, Birla collaborate on forest-to-garment traceability solution

By Tasneem Bulbulia

Sappi Dissolving Pulp has partnered with viscose manufacturer Birla Cellulose to provide a forest-to-garment traceability solution for brand owners.

Through this collaborative partnership, its dissolving pulp brand, Sappi Verve, continues to strengthen its sustainability credentials within the textile industry.

Providing a brand-owner traceability solution has been made possible with the use of Birla’s pioneering Green Track blockchain technology, coupled with Sappi’s comprehensive database on wood origin for its dissolving pulp operations in South Africa and the US, Sappie Verve notes.

Sappi is committed to delivering practical innovations, building trust and creating shared value in its supply chain –  working closely with its partners to promote and shape the sustainability of the man-made cellulosic fibre sector towards a net positive vision, says Sappi Verve sustainability GM Krelyne Andrew.

Traceable and transparent supply chains provide brand owners and consumers with the assurance that their products originate from sustainable and renewable sources of wood, free from deforestation, where biodiversity is promoted and where customary, traditional and civil rights of people are upheld, Sappi Verve states.

“This collaboration is part of Sappi’s vision as a sustainable woodfibre business to provide relevant solutions and deliver enhanced value as a trusted partner to all its stakeholders,” says Andrew.  EN

Fund managers start ball rolling on large-scale kelp farm off Namibian coast

By Marleny Arnoldi

Fund management firm Climate Fund Managers’ Climate Investor Two Fund has partnered with Namibia Infrastructure Development and Investment Fund (Nidif), managed by Namibian private equity fund manager Eos Capital, and Kelp Blue for the commercial development of the world’s first large-scale kelp farm.

The farm will require a $60-million investment over a five-year period, which will be funded by both international and Namibian sources through the investor funds, pending approvals.

Netherlands-headquartered offshore floating aquaculture company Kelp Blue’s role will include helping to secure the necessary Namibian regulatory approvals and liaising closely with local authorities.

Kelp Blue will cultivate giant kelp in nutrient-rich waters 3 km to 10 km off the coast of Namibia, near Lüderitz. The seaweed canopy will be sustainably harvested to produce alternative agri-food, biostimulant and textile products.

Kelp is a fast-growing seaweed and has the ability to sequester more carbon dioxide than terrestrial forests, while boosting marine biodiversity and improving fish stocks and generating additional ecological benefits, including counteracting ocean acidification and de-oxygenation.

Kelp Blue’s business model will add value across the entire kelp value-chain. The introduction of offshore engineering innovations and novel processing technologies will reduce overheads and increase scalable process efficiencies.

Economic development will be promoted through the creation of value-added products in Namibia for local consumption and export. Kelp Blue will also create employment opportunities in coastal communities and contribute to economic growth in outlying areas.

Kelp Blue is directly aligned with the goals of the Climate Investor Two facility as it offers a viable alternative to existing water and waste management practices and current approaches to ocean system management. It is also aligned with Eos Capital and Nidif’s shared mission of contributing to the growth of the Namibian economy.

The business will further contribute to Namibia’s attainment of the United Nations’ Sustainable Development Goal Number 14: Life below water through the creation of marine ecosystems.

“We are proud to partner with Kelp Blue in its efforts to accelerate marine biodiversity resilience. As one of the early investments under the Climate Investor Two financing facility, this partnership speaks to our commitment to supporting the health and productivity of our blue planet.

“Kelp Blue has the potential to improve aquatic biodiversity, contribute to effective fisheries management and provides alternative revenue streams for coastal economies,” says Climate Fund Managers CEO Andrew Johnstone.

Eos Capital managing partner Nicole Maske says that, in addition to the positive impact on the ocean and fish stocks, this is an exciting opportunity to add to the infrastructure and growth of Lüderitz, thereby enhancing prospects for the local community and to secure inward investment into Namibia on an environmentally responsible basis.

“We  look  forward to repaying the confidence that Climate Fund Managers and Eos Capital have placed in us by ensuring the success of this project, creating meaningful employment opportunities in Namibia and making a valuable contribution to the integrity and viability of ocean ecosystems,” adds Kelp Blue founder Daniel Hooft.  EN

      Loss of capacity and skills in cotton value chain “cost” SA R20-billion

Thomas Robbertse, chief executive of IQ Logistica.

Despite the solid growth that the South African cotton industry has experienced in the last seven years, the country still lacks the capacity and

This means that most of the land’s lint cotton is exported for processing before the final product is imported again. This translates into an opportunity loss of about R20,4 billion of beneficiation in the local cotton value chain based on the 2018/19 production year’s output of 51 000 tons of lint cotton.

South Africa’s cotton production has grown by almost 800% since 2013 following the establishment of the South African Sustainable Cotton Cluster (SCC) to build capacity in the Southern African cotton industry value chain. The SCC was funded by an initial grant of R200 million from the Department of Trade and Industry.

84% of cotton lint exported

And although the local cotton ginners have up to now been able to absorb the surge in cotton production, South Africa does not have the spinning capacity to convert the lint into yarn, meaning that 84% of last year’s lint cotton had to be exported.

According to Thomas Robbertse, chief executive of IQ Logistica (IQL) – the agtech company which developed the cloud-based SCC Operations Visibility Platform that integrates the cotton supply chains – the set-up of a cotton spinner is very capital intensive, costing anything from R1 billion upwards to install.

“Despite the number of ginners declining from 24 in the heyday of local cotton production to the present seven ginners, it is still able to accommodate the cotton that is currently farmed. However, South Africa lacks spinning capacity meaning that most of the lint cotton is exported for processing and manufactured into clothing items, before being imported again.”

Employment opportunities lost

Robbertse says last year’s cotton lint left South Africa’s shores at about R24/kg, whilst the finished product was imported at around R500/kg. “Based on the export of about 42 840-ton cotton lint and the concomitant value loss of R476/kg (R500/kg – R24/kg), the opportunity loss in local beneficiation to the economy comes to roughly R20,4 billion. Not to mention the many potential employment opportunities that have gone wasted.

But even if we were to build spinning capacity in South Africa, there would still be a huge skills shortage because of the demise of the clothing textile industry over the last 30 years brought on by trade liberalisation and global competition, which unfortunately also led to cheap imports. This all means that were we to establish spinners in South Africa, we would still have to import skills from Asia that could then also train local labour in the trade.”

But according to Robbertse, it is not all bad news as the export of cotton lint does earn the country important foreign exchange and helps farmers to offset some of their input costs like fertiliser, fuel and equipment that are all dollar-based. Agri Orbit

Mr Price – trading statement

The group is currently finalising its interim financial results for the 26 weeks ended 26 September 2020. These results will be announced on the Stock Exchange News Service on or about Thursday, 26 November 2020.

Following the trading statement published on 20 August 2020, shareholders are further advised that headline earnings per share is likely to be between 23% and 28% lower than that reported for the previous corresponding reporting period, as reflected in the table below.

Earnings impact
The closure of all the group’s South African stores during the nation-wide lockdown between 27 March 2020 and 30 April 2020, and the subsequent trade restrictions due to COVID-19, has had a material impact on the group’s earnings. During the month of April 2020, the group estimates that it lost approximately R1.8bn in sales. Despite stores being permitted to trade from May 2020, the group was further negatively impacted as its full assortment of merchandise was not permitted to be sold until 1 June 2020.

As a result, the group advises that it expects the interim financial results for the 26 weeks ended 26 September 2020 to fall within the following ranges:
Expected interim 26/09/2020 cents
Basic earnings per share: 275.0 to 297.2
Basic headline earnings per share : 319.1 to 341.3

Following a detailed review, impairments of R153.4m were recognised, relating to IT assets and right-of-use-assets (store leases). These impairment charges were included in basic earnings per share but are added back for the calculation of headline earnings per share. The current economic conditions have required an increase in the impairment of the group debtors’ book to 15.2%. Cash continues to be the favoured tender type, accounting for 86.0% of total sales. The group achieved its target of double-digit declines in inventory on hand in H1 FY21, which has been adequately provided for.

Interim results presentation
A live webcast of the interim results presentation is scheduled for 09:00 am on or about 26 November 2020. This can be accessed through the following link: https://www.corpcam.com/MrPrice26112020
The estimate financial information on which this trading statement is based has not been reviewed and reported on by the company’s external auditors.

Steinhoff Investment – Lender Consent Request

Further to the announcements of 27 July 2020 (the “July Announcement”) and 9 October 2020 (the “October Announcement”) by Steinhoff International Holdings N.V. (“SIHNV” and together with its subsidiaries, “Steinhoff”), in relation to the proposal to settle various legacy litigation and claims against Steinhoff (the “Proposed Settlement”), and the launch of a consent request to obtain the formal support of Steinhoff’s financial creditors to the terms of the Proposed Settlement (the “Consent Request”), Steinhoff is pleased to announce that it has received overwhelming support from its financial creditors in respect of the Proposed Settlement.

There were very high levels of voting participation in response to the Consent Request and all creditors who voted gave their approvals, with the exception of only one institution. Steinhoff notes that the sole dissenting institution is affiliated with an entity that is currently engaged in a dispute with Steinhoff in relation to the terms of the Proposed Settlement.

Following the application of ‘snooze’ mechanics applicable to non-responding lenders, Steinhoff achieved unanimous support from lenders across the “Hemisphere” and “SEAG” facilities, other than the “SEAG Facility A2 Creditors”, where Steinhoff obtained the support of 93% by value. For the “SFH” facilities, Steinhoff obtained the support of between 94% and 96% by value.

As a result of the overwhelming support of its financial creditors, Steinhoff has obtained the requisite consent from its creditors in respect of all relevant financial instruments, with the sole exception of the “(SEAG) Contingent Payment Undertaking” created by SIHNV in favour of Lucid Trustee Services Limited and Lucid Agency Services Limited dated 12 August 2019 (the “SEAG CPU”), in respect of which the support of 100% of voting creditors was required. Due to the sole dissenting institution voting against the Consent Request, Steinhoff was unable to obtain 100% support from the “SEAG Facility A2 Creditors” under the SEAG CPU. As a result, SIHNV now intends to pursue an English law scheme of arrangement to obtain the necessary approval of its creditors under the SEAG CPU.

Consent Request to Financial Creditors

As stated in the October Announcement, SIHNV launched the Consent Request to obtain formal support from Steinhoff’s financial creditors for the terms of the Proposed Settlement and to make certain amendments to the relevant underlying finance agreements to facilitate and recognise its implementation. The Consent Request also sought approval for terms on which the maturity date under Steinhoff’s financings can be extended in conjunction with a successful implementation of the Proposed Settlement and in certain other circumstances.

SEAG CPU

As noted above, Steinhoff was unable to achieve the required support of 100% of the “SEAG Facility A2 Creditors”.

As a result, and as contemplated in the July Announcement and the October Announcement, SIHNV will now take steps to commence an English law scheme of arrangement pursuant to Part 26 of the Companies Act 2006 in order to obtain the consent of creditors under the SEAG CPU (the “SEAG CPU Scheme”). The purpose of the SEAG CPU Scheme is to implement the required amendments to those finance documents and to otherwise facilitate implementation of the Proposed Settlement and the associated amendments sought by the Consent Request. Whilst the SEAG CPU Scheme will take longer to complete than the initial Consent Request process, it will require a lower consent threshold (i.e. a majority in number representing at least 75% by value of the members of each class present and voting).

Indicative SEAG CPU Scheme Timeline

SIHNV anticipates launching the SEAG CPU Scheme with the issuance of a ‘Practice Statement Letter’ to participating creditors in the coming days, following which SIHNV plans to achieve the following timeline for implementation of the SEAG CPU Scheme:

*late November 2020 – scheme convening hearing;

*mid-December 2020 – meeting of participating creditors; and

*late January 2021 – scheme sanction hearing and scheme effective date.

Further information in relation to the SEAG CPU Scheme will be set out in the ‘Practice Statement Letter’, and SIHNV will provide further updates as and when appropriate. The SEAG CPU will run in parallel with other processes and as such is not expected to delay the intended implementation of the Proposed Settlement. As previously announced, Steinhoff’s intention is to implement the Proposed Settlement as soon as possible.

Further Information

Further information on the Proposed Settlement, including a Frequently Asked Questions document, is available on the following website: https://www.steinhoffinternational.com/settlement-litigation-claims.php. On this website, claimants may submit their contact and claim details, inform Steinhoff of their intention to support the Proposed Settlement and register for updates. Alternatively, Steinhoff’s investor relations team can be contacted by email at settlement@steinhoff.co.za. As usual, further updates will be provided in due course as the Group continues with the implementation of the Proposed Settlement. The Company has a primary listing on the Frankfurt Stock Exchange and a secondary listing on the JSE Limited.

             Did you know……..

Cruel Jewel

Animal rights activists currently campaign against wearing fur and leather for the sake of fashion, but at the turn of the century they had even more gruesome fashions to protest. One fashion in the late 1800s saw people pinning live chameleons to their clothing to wear as brooches.

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