My Brain Food This Week...

Anglo closes the door in BHP's $49 billion face, the Ackerman family is getting out of Pick n Pay, and I wrote about a cash flow essential for small businesses

Mansa

Jun 01, 2024

Unlocking Cash Flow

(Mansa Sithole)

What Happens to Stocks and Cryptocurrencies When the Fed Stops Raining Money? - WSJ

Key takeaways:

Economic Challenges: Businesses in South Africa are grappling with low confidence, high inflation (5.2% vs. the target of 4.5%), and rising interest rates (3.5% to 8.25% since 2021).
Impact on Small Businesses: Smaller businesses feel these pressures more acutely due to limited infrastructure to handle economic hardships.
Solution - Streamline Operations: One effective strategy is to measure and improve the Cash Conversion Cycle (CCC).
Understanding CCC: The CCC assesses how long it takes for a company to convert inventory investments into cash flow, consisting of three components:
- Days Inventory Outstanding (DIO): Average days inventory is held.
- Days Sales Outstanding (DSO): Average days to collect payment.
- Days Payable Outstanding (DPO): Average days to pay suppliers.
Strategies for Improvement…

💎 Africa

Anglo American Plc has rejected BHP Group's $49 billion takeover bid, opting to pursue its own restructuring plan. The decision came after a board meeting where BHP's request for an extension was declined. CEO Duncan Wanblad, in the role for just over two years, now faces the challenge of executing a turnaround plan involving the exit from platinum and coal, and potentially selling or spinning off De Beers. This restructuring aims to address investor concerns and strengthen the company amidst a competitive landscape. Despite BHP's interest in Anglo's copper mines and the potential for future bids, Wanblad is focused on demonstrating progress and securing Anglo's independence. The company's plan, however, has raised questions about its feasibility and the CEO's ability to navigate the complex restructuring while managing investor expectations.
The Ackerman family, founders of South Africa's Pick n Pay, will relinquish control of the struggling retailer as part of a strategic overhaul aimed at reducing losses, cutting debt, and regaining market share. Gareth Ackerman will retire as chairman after 14 years, with Sean Summers appointed as the new CEO to revitalise the business. The company has faced declining profits and market share losses to competitors like Shoprite due to poor strategic decisions. Pick n Pay reported a 1.67 billion rand loss for the year ending February 25. Summers' two-step recapitalisation plan includes a rights issue to raise up to 4 billion rand and listing its discount grocery chain, Boxer, to address the group's 6.1 billion rand debt and fund the new strategy. Ackerman Investment Holdings will support the plan, investing up to 1.025 billion rand, but will forgo control, reducing its voting rights and board representation. The plan also involves closing or converting over 100 loss-making stores and targeting 1.3 billion rand in cost cuts over three years, aiming for the core business to break even by 2027.

🌎 Global

Elon Musk announced that his AI startup, xAI, plans to build a supercomputer requiring 100,000 semiconductors to power the next version of its AI chatbot, Grok, by fall 2025. xAI is negotiating a $10 billion deal with Oracle to rent cloud servers and is the largest customer of Oracle's H100 AI chips from NVIDIA. The supercomputer, dubbed the "gigafactory of compute," aims to connect 100,000 NVIDIA H100 GPUs, significantly surpassing current GPU clusters. xAI, founded in July 2023, recently raised $6 billion in Series B funding, achieving a $24 billion valuation. The funds will be used to market xAI's products, build infrastructure, and advance research. NVIDIA's H100 GPUs, crucial for AI development, are in high demand, with major tech companies like Microsoft and Meta also vying for them.