Despite a slower recovery from the drought and a "stressed" consumer environment, agricultural retailer Kaap Agri expects headline earnings to improve at least by 14%, it said in a trading statement issued on Friday.
The share price climbed jumped almost 18% to close the day at R28.50.
Kaap Agri specialises in retail and trade in agricultural, fuel and related retail products such as packaging and financial and grain handling services, in Southern Africa, according to its website.
In its trading update, the group said it managed to increase revenue by 29.1% to R8.5bn, compared to R6.5bn reported in the previous year. "This growth in revenue was driven by a 10.6% increase in the number of transactions," the statement read.
However gross profit growth has not been aligned to revenue growth – mainly due to the "changing impact of sales mix, business environment, fuel price fluctuations" coupled with margin pressure, the group said.
The trading results have been impacted by drought in parts of the Western Cape and Northern Cape and the "subdued" retail sector, according to the statement.
Despite the negative impact of these factors, the group forecasts earnings per share to be between 394.88c and 402.86c – this is an increase 12.9% and 15.2%, compared to the previous year's 349.80c per share.
Headline earnings per share is projected to be between 397.72c and 405.76c, or an increase between 14.0% and 16.3% compared to the previous year's 348.98c.
"The past two years have been challenging for the company. However, we believe our growth strategies and resilience have delivered respectable results given the conditions under which we have traded," the statement read.
"We believe the business is suitably positioned to take advantage of an improvement in trading conditions and to execute in terms of our strategic imperatives."
The company will release its financial results for the year ended September 30, 2019 on November 28, 2019.