Challenging macro conditions impact Zeder results

Cape Town - The JSE listed Zeder [JSE:ZED], with its specific focus on the agri, food and beverage sectors, experienced challenging macro conditions during the financial year ended 28 February 2018 that negatively impacted the company and most of its portfolio companies, it announced on Tuesday.

Many of these conditions, however, improved significantly during the latter part of the reporting period, boding well for a recovery of Zeder and its portfolio, according to CEO Norman Celliers.

The sum-of-the-parts (SOTP) value per share of Zeder’s key benchmark decreased by 8.0% to R7.85 per share as at 28 February 2018, with the total underlying investment portfolio amounting to R14.2bn as at 28 February 2018, compared to R15.2bn in 2017.

The SOTP values are calculated by using the quoted market prices for all JSE-listed investments and market-related valuations for unlisted investments.

Zeder's recurring headline earnings per share, reflecting the sum of its effective interest in that of each of its underlying investments, decreased by 35.2% to 27.6 cents for the period under review.

The company said in a statement that this was due to a combination of decreases reported by Pioneer Foods, Capespan, Zaad and Agrivision Africa, against increases reported by Kaap Agri and Quantum Foods and the positive effects of the internalisation of the base management fee during the prior year.

Zeder maintained its dividend on 11.0 cents per share in the financial year to February 2018. Celliers said the dividend was made possible due to acceptable cash generation by underlying portfolio companies.

Challenges

Celliers told Fin24 that the financial period under review had a lot of challenges, including from an economic and financial perspective. He said, while the results are disappointing, they have largely been anticipated as its listed investee companies, Pioneer Foods, Kaap Agri and Quantum Foods, have reported their results for their respective financial years ended.

The agri sector in the Western Cape faced the drought and in the northern part of the country there were the after-effects of El Nino.

"Yet, we are proud of the way the company performed under these circumstances. So far, our portfolio is OK due to irrigated sources of water, but we share everyone's concerns about rain in the upcoming winter months," said Celliers.

For him some of the highlights of the financial period included the listing of Kaap Agri and the logistics division of Capespan.

"If you take all the challenges into consideration, we were pleased with the performance of the companies in our portfolio weathering the storm. They are all number 1, 2 or 3 in their areas and still maintained their market shares and relative positioning. This retention of market position is very important going forward, especially when one expects some form of recovery," said Celliers.

What helped, in his view, was having conservative balance sheets, diversified income streams and good management teams.

"Looking forward, our strategy is to recover the core business. We would like to see our companies recover from the slightly weaker results and think we are well positioned to do that," said Celliers.

Portfolio

Pioneer Foods, which remained Zeder’s largest investment with a 53.9% (2017: 62.7%) share of its portfolio, reported a 50% decrease in adjusted headline earnings per share from continuing operations for the year ended 30 September 2017.
 
This decrease was largely due to constrained local and regional trading conditions and an unfavourable procurement position on maize, as reported by Pioneer.

For its financial year ended 31 December 2017, Capespan reported a decline of 27.6% in recurring headline earnings per share. The negative lag-effects of El Niño and corresponding drought conditions continued to have a negative effect on overall fruit volumes in most procurement territories.

Zaad reported a 16.7% decrease in recurring headline earnings per share for its financial year ended 31 January 2018, largely due to lower sales from its SA operations during the drought.

The JSE listed Kaap Agri delivered encouraging results, according to Zeder, for its financial year ended 30 September 2017, with headline earnings per share having increased by 17.9%.

Its strategy of product and geographic diversification bodes well, according to Celliers, while its recent focus on adding non-agri income streams and improving efficiencies continues to gain traction.

Agrivision Africa reported an R55m recurring headline loss for its ?nancial year ended 31 December 2017, as opposed to a R40 recurring headline profit in the previous year.

Quantum Foods reported a 74.0% increase in headline earnings per share for its financial year ended 30 September 2017.

By late afternoon trade Zeder's share price was down 0.83% at R6.

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