Certainty about land reform and water regulations is needed to build investor confidence in the agricultural sector, according to JSE-listed Kaap Agri [JSE:KAL] CEO Sean Walsh.
Given that there is still uncertainty about land reform, a general lack of business confidence - and consequently less investment in the run-up to the election, he believes the interim results of Kaap Agri are pleasing.
Kaap Agri specialises in agricultural, fuel and related retail markets in Southern Africa. The group released its interim financial results for the six months ended March 31, 2019 on Friday morning.
More certainty, more investment
"With the election behind us, more certainty in general terms can be expected. This should give room for a recovery in business confidence and more investment," Walsh said in a statement on Friday.
"More private investment is paramount, as investment by government alone will not bring an economic recovery. More confidence and positivity is also needed in the retail environment for growth."
Kaap Agri's revenue increased by 28.7%, amounting to R4.4bn against R3.4bn in the previous comparable period, with like-for-like comparable sales growing by 10.7%. Gross profit increased by 15,6% but did not grow in relation to revenue growth, the group said.
Growth in the value of business transactions increased by 23.6% to R5.5bn, driven by a 21.9% increase in the number of transactions. Product inflation, excluding the impact of fuel inflation, was estimated at -0.5%.
An interim dividend of 33.5 cents per share was declared, representing an increase of 4.7% compared to the 2018 interim period.
The group's financial performance was nevertheless impacted by a slower-than-anticipated recovery in agricultural conditions in the Western Cape and the continued drought conditions in the Northern Cape.
Revenue from irrigation manufacturing decreased by 5.3% due to the lingering drought-related impact on capital investments and upgrades, while operating profit reduced by 27.9%.
The largest impact on revenue came from The Fuel Company, specifically in newly-acquired and non like-for-like sites.
Kaap Agri also expected further strong growth in fuel site convenience and quick service restaurant retail operations, it said.
The addition of the Forge business in KwaZulu-Natal, as well as market share gains in the inland region, were a boon the group's trade division.
Revenue from the agri and retail trading division, which includes the Agrimark retail branches, Pakmark packaging material distribution centres, Forge, mechanisation services and spare parts, increased by 24.1%, with operating profit before tax increasing by 0.7%.
Excluding the impact of Forge, non-agri retail sales performed well, the statement said, growing by 3.9% compared to the previous period.
Wesgraan, which includes grain handling and storage of grain and related products, seed processing and potato seed marketing, grew revenue by 26.6% off improved wheat harvests in the Western Cape, resulting in a 16.8% increase in operating profit before tax.