Cape Town - Despite inevitable cyclicality, investing in the food and agribusiness industry should offer good long-term returns, according to Norman Celliers, CEO of JSE-listed agri-investment company Zeder [JSE:ZED].
The JSE-listed company announced its results for the financial year ended February 28 2017 on Monday.
Celliers said currently the sector is experiencing a challenging macro cycle. The operational environment is tough, especially because of the impact of the recent drought. Under these circumstances he, therefore, regards Zeder's increase of 0.5% to 42.6 cents per share in recurring headline earnings as sacceptable.
"From a valuation point of view, encouraging results have been delivered as underlying investments increased in value,” said Celliers.
“From an earnings point of view, we expected it to be difficult and are, therefore, content with a sideways movement, but we continue to actively drive for sustainable growth in earnings over the medium to long-term."
Strategic internal focus
With its investments mainly in the agri, food and beverage sectors, the sum-of-the-parts (SOTP) value per share of Zeder’s key benchmark increased by 23.1% to R8.53 per share on a like-for-like basis as at February 28 2017. The total underlying investment portfolio amounted to R15.2bn, up from R12.4bn as at February 29 2016.
The SOTP values are calculated by using the quoted market prices for all JSE-listed investments and market-related valuations for unlisted investments.
Celliers said the modest increase for the year under review resulted from tough trading conditions experienced at Pioneer Foods, Capespan and Quantum Foods being offset by what he terms commendable results from Kaap Agri, Zaad and Agrivision.
A final dividend of 11 cents per share - compared to 9c per share in the previous financial year - was declared. This is an increase of 22.2%.
Celliers pointed out that, of importance for the future is Kaap Agri’s intention to list on the main board of the JSE during the year.
He added that, despite a challenging macro environment, the group continued to deliver strong results for its financial year ended September 30 2016, with headline earnings per share having increased by 15.1%.
“Significant progress has been made in structuring and diversifying the company to ensure an attractive listing. Its strategy of product and geographic diversification bodes well for the future and its focus on adding non-agri income streams and improving efficiencies has gained traction," said Celliers.
“Zeder remains actively involved with its underlying portfolio of companies and will seek to add select meaningful new investments when appropriate."Read Fin24's top stories trending on Twitter: Fin24’s top stories