Good morning from the Financial Times.
Today is Wednesday, October 22nd, and this is your FT News Briefing.
Netflix earnings fell short of expectations, and Unilever has a big old ice cream headache.
Plus, South Africa's black economic empowerment policy had good intentions, but critics say it's falling short.
So all you've pretty much done is you've traded a class of wealthy white oligarchs, I suppose, for black oligarchs.
I'm Mark Filippino, and here's the news you need to start your day.
Not even K-pop demon hunters were enough to save Netflix last quarter.
The U.S. media group reported earnings yesterday.
It said its operating margin was 28%.
That fell short of what it told investors to expect, which was 31.5%.
The disappointing numbers were because of costs related to an ongoing dispute with Brazilian tax authorities.
Netflix said without that, its operating margins would have been ahead of its forecast.
It wasn't all bad news, though.
The company's revenue grew more than 17 last quarter, thanks in part to Netflix's most successful movie ever K-Pop Demon Hunters.
There was also growing membership, higher prices, and more advertising revenue.
But investors overall were not happy with the results.
Netflix shares fell as much as 6% in after-hours trading.
The U.K.'
's Unilever is delaying the spinoff of its ice cream division because of the US government shutdown.
The Magnum ice cream company was supposed to go public in a few weeks, but now those plans are on ice.
Here to tell us more is the FT's Madeline Speed.
Hey, Madeline.
Hi, Mark.
So Madeline, just tell me a little bit more about what Unilever said yesterday.
How has the government shutdown in the U.S. impacted Unilever's spinoff plans?
Yeah, so basically, the company said yesterday morning that the Securities and Exchange Commission was unable to register the shares in its new business, the Magnum Ice Cream Company, to trade on the New York Stock Exchange because of this government shutdown.
This is because the SEC has furloughed most of its staff, which basically means they haven't got anybody there to carry out basic operations including, for example, the review and approval of IPOs.
So this isn't just affecting Unilever, but all companies who are planning a listing in the US at the moment.
The SEC has flagged a workaround that would allow some companies to get their listings to be automatically registered and then reviewed at a later date.
But for now, a lot of these companies are just in limbo, waiting for the shutdown to be resolved.
And remind me, why did Unilever want to spin off this business in the first place?
So the spin-off of the ice cream business is part of a kind of longer-term broad turnaround plan at Unilever which is seeing it pivot from being a kind of multi-category food beauty, home care conglomerate into something more focused towards like, beauty and well-being.
So they're slowly getting rid of a lot of their food assets, which includes ice cream.
And there's some big names there, too.
Like you said, Magnum, and then there's Ben & Jerry's, too.
Now, you know, the U.S. government shutdown doesn't really seem like it has an end in sight.
What does this mean for Unilever investors?
So this delay is just adding uncertainty for Unilever investors.
I mean for many of them it might be frustrating because they're trying to make a call about what they're doing with their shareholding in the company.
They expected to be able to do that after November, the 10th, which is when the listing was planned for.
So next month.
Unilever reports earnings tomorrow.
Madeline, what should we expect from the new CEO, Fernando Fernandez?
So Fernando Fernandez is still relatively new to the company.
He was promoted from the CFO role to the CEO role in February.
So for him, he's all about delivering, turning around the company, boosting growth, boosting sales.
So he's going to want to really convince the market tomorrow that this turnaround is working.
He's been targeting 2% sales volume growth and 4% organic sales growth.
But by the looks of analyst forecasts, sales growth is more likely to be in the region of 3.5%.
So he may come under a little bit of pressure for that.
The lower organic sales growth is for a number of reasons, including US tariffs on Brazil, which could affect performance in the Latin America region, and also tax reforms in India, which affects everyday goods that Unilever sells in India, has massively disrupted the market.
So, while everyone's a huge fan of Fernando Fernandez, at the moment, the sales look like they are going to be slightly under pressure tomorrow.
Madeline Speed is the FT's consumer industries reporter.
Thanks, Madeline.
Thanks for having me, Mark.
Gold prices just had their biggest sell-off since 2013.
The precious metal sank 6 yesterday and you're probably thinking it had to come down at some point, right?
Gold has hit historic high after historic high this year.
Analysts are pointing to a few things that caused the reversal an apparent thaw in US-China trade tensions and a rebound in the US dollar.
Plus, the wedding and gold-buying season in India is drawing to a close, and it's the world's second-largest consumer.
Gold wasn't the only shining metal to have a bad day on Tuesday.
Silver and platinum also fell 7.5% and 5% respectively.
One of the flagship policies that came out of post-apartheid South Africa was called Black Economic Empowerment.
Nelson Mandela's African National Congress Party put forward the policy and it was supposed to help narrow the wealth gap between white and black South Africans.
But it's had a limited impact and has increasingly become the subject of debate within the government.
Here to talk with me about it is Rob Rose.
He covers South Africa for the FT.
Hi, Rob.
Hi, Mark.
So can you tell us about this policy and how it was meant to work?
Well, Black economic empowerment imposed measures like requiring companies to have a certain amount of Black executives in their businesses, certain amounts of Black shareholders and to preference black workers in the workplace, as well as giving more opportunities to black South Africans.
That was the intention of Black Economic Empowerment.
And what ended up happening?
Well, the problem with black economic empowerment, as it has been implemented, is that it had the unintended consequence of essentially creating a class of political oligarchs who have got access, preferential access, to deals.
So you've had many of the largest companies in South Africa sell their shares in these flagship black empowerment deals to people who were in the ANC, the ruling party.
So all you've pretty much done is you've traded a class of wealthy white oligarchs.
I suppose for black oligarchs, What this hasn't done then, is manifested in broad-based black economic empowerment.
So we still have a situation where you have white families in South Africa earning four times that of the average black family.
So in terms of narrowing the gap, it's been something of a failure.
And I think that that's why calls have risen to review the policy.
What did critics you spoke to have to say about it?
You know, in the piece for the FT, we spoke to one of the business owners, Sipo Ndamanda, and he said that he felt that black empowerment wasn't really for the man on the street.
It was for the well-connected political elite within the ruling party, the African National Congress.
And I think that's been a persistent criticism.
There's an academic at the University of Advertisement, William Gometa, who said that a trillion rands worth of assets have been transferred to roughly 100 people.
Now, that's a massive amount of money.
That's, in dollar terms, about $55, $60 billion. transferred to just a handful of people.
That speaks to the frustrations around how Black empowerment hasn't really been broad-based and has subsequently failed to transform society in any meaningful way.
What is South Africa's government doing to deal with this growing opposition to the policy?
Anything?
Recently there have been a couple of colloquiums where the government has talked about this black empowerment policy.
President Cyril Ramaphosa, who himself benefited from many of these black empowerment deals, has consistently backed black economic empowerment as a policy that the government stands by.
But I think amongst the more enlightened people within the ANC and outside of the ANC there's an understanding that there needs to be an overhaul of the measures, partly to assess why it's gone wrong, why it's just benefited the elite as opposed to the broader population.
It is, according to the World Bank statistics, the most unequal society in the world.
So, it's clear that if affirmative action was meant to close that gap, it manifestly hasn't.
Rob, help put this policy in the broader context for me.
What does the opposition to this policy tell us about post-apartheid South Africa?
I mean that's fundamentally a very deep question about what the current society in South Africa looks like.
After apartheid, you had an underclass of black South Africans who were kept from any economic advantage, who needed to be lifted out of that position while still fundamentally keeping to the capitalist system.
South Africa has now.
Black economic empowerment was one of those redress measures and it certainly hasn't worked as people intended.
What you needed to have done, according to the experts on this issue, is to create a class of black entrepreneurs who gave life to the economy.
Instead, it focused on giving shares in existing companies to to Black political leaders.
They feel we need to encourage entrepreneurship in the country and find a way for the country to claw out of a situation where its economic growth has been less than 1 per year over the past decade.
And that's quite a deep hole to climb out of.
Rob Rose covers South Africa for the FT.
Thanks, Rob.
Thanks very much.
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