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$3.59bn wiped from WA companies in Africa
9 February 2015: Western Australian listed companies operating in Africa have been hit hard – not just by declining commodity prices, but industrial relations challenges, geopolitical tensions and the Ebola health crisis.
According to Deloitte Australia, these factors combined to make 2014 one of the most challenging years in recent memory.
A special edition of the Deloitte WA Index, released today at the opening of the Investing in African Mining Indaba conference in Cape Town, South Africa, highlights the performance of WA-listed companies with African operations over the past 12 months.
Deloitte Clients and Markets partner for Western Australia, Tim Richards, said the combined market capitalisation of the companies took a significant fall over the period.
“The combined market capitalisation of WA-listed companies with operations in Africa that comprise the Deloitte WA (Africa) Index fell $3.59bn, a huge 47.3% over the 12-month period, to close at AU$4.0bn,” Mr Richards said.
“Of this movement, AU$2.0bn is attributable to merger and acquisition activity that saw nine companies with African operations delisting from the ASX during the year.
“By comparison, the market capitalisation of all WA-listed companies which comprise the Index, not just those operating in Africa, declined just 16.9% over the same period, closing the year out at AU$129.3bn - the lowest point since June 2013.”
Mr Richards added that declining commodity prices had a severe impact, with some losing almost half of their market value over 2014.
“Coupled with the Ebola outbreak in West Africa, as well as challenges relating to industrial relations and geopolitical tensions, 2014 was a challenging year for many companies and has highlighted the changing nature of investment into Africa,” he said.
“However, it wasn’t all bad, with companies Newfield Resources Limited and Paladin Energy Limited increasing market capitalisation respectively by 202.0% (AU$57m) and 33.8% (AU$152m), identifying them as the top Deloitte WA Index Indaba Edition Movers and Shakers for 2014.
“The Index also hit a two-year high mid-year at AU$156.9bn, before the resource dependent market was weighed down by falls in commodity prices in the second half, influenced by weaker demand from the Chinese manufacturing sector, a strengthening US dollar and oversupply of some of the major commodities.
“Yet it’s clear the African resources sector still has potential as an emerging market opportunity, a fact clearly demonstrated by the acquisition during the year of a number of companies with significant African operations.”
Australia's investment into Africa in recent years has been dominated by the mining and mining services sectors and, at its height, more than 230 ASX-listed companies were active in projects across 42 African countries. However over the past 18 months, this investment has contracted given the challenging economic environment.
Deloitte’s Australia-Africa Services Group Leader Jacques van Rhyn said that in contrast, Australian oil and gas investment in Africa has increased steadily over the last few years.
“This has ranged from Woodside reappearing with interests in a number of countries, through to an increase among micro-cap junior exploration companies exploring frontier provinces,” Mr van Rhyn said.
“It is a positive sign that Australian participation in the African oil and gas sector is clearly increasing. This investment is still in its infancy, but we believe that, in time, it could reach or exceed the levels of capital invested by the sector’s mining cousins.”
Copies of the full Deloitte WA Index report are available at Mining Indaba, Deloitte team stand 125.
Further information can be found at www.deloitte.com/za/miningindaba
WA’s top 100 listed companies as at 31 December 2014
Source: Australian Securities Exchange and Capital IQ
Earnings per share = company earnings divided by number of shares
Price/Earnings ratio = A stock’s price divided by its historic earnings per share
N/A — Not Available
S — Suspended
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