Drought impacts Kaap Agri results

Sean Walsh (Supplied)
Sean Walsh (Supplied)

Kaap Agri, the JSE-listed agriculture related retail, trade and services group, said on Thursday it achieved modest growth during the financial year ending September 2018.

It said this was achieved "despite an exceptionally difficult trading period characterised by drought, policy uncertainty and waning consumer spending".

Kaap Agri employs over 3 000 people and has a footprint of 200 business units across South Africa and Namibia, which includes the retail trading brand Agrimark. Other brands in the Kaap Agri stable include Wesgraan, Pakmark, Liquormark, as well as Agriplas. The company’s retail fuel operations are grouped within The Fuel Company (TFC), which also operates Expressmark.  

During the period under review, revenue increased to R6.55bn, amounting to an 8.1% increase on a proforma basis with like-for-like comparable growth of 6.9%. This growth was mainly driven by a 12.1% increase in the number of transactions, and TFC fuel volumes growing by 38.5% on owned and managed sites awaiting regulatory approval.

Recurring headline earnings grew by 1.7%, while recurring headline earnings per share increased by 0.7% to 354.10 cents, resulting in a five-year compound annual growth rate of 14.1% to 30 September 2018.

A final dividend of 84.70 cents per share was declared bringing the total dividend for the year to 116.70 cents per share, representing an increase of 4.2% compared to 2017.

"Our growth came mainly from general dealers and unfortunatly the drought cost us around 11%. Earnings growth is made up of a loss as result of the drougght, but positive from the rest of the business," Kaap Agri CEO Sean Walsh told Fin24.

"The drought has been a major impact on our business. A lot of the farmers had to hold back on investments - predominantly in the Western Cape area. Fortunately, our exposure in the rest of the country showed positive growth."

He said the main areas impacted by the drought in the Kaap Agri business related to the wheat intake which was close to half and affected trade in the "western areas".

"Fortunately, over the last few years we diversified from a geographical point of view, taking trade to more areas. Also, TFC now contributes about 20% of our business and is not effected by the drought."

Asked about land expropriation, Walsh said that was not what impacted Kaap Agri's results, it was the drought. He said Kaap Agri will continue to invest in the agriculture sector as it believes it is "the right thing to do".

Looking ahead, Walsh said the wheat harvest is already 88% larger than last year - "a great recovery" - and dam levels are such that fruit and vegetable farmers will have a normalised year. Furthermore, on the TFC side, there is already a pipleline of seven confirmed new sites for the new year and it has just expanded its trade footprint with another acquisition.

"We would like to continue our focus on growing the company with a major optimisation drive. Furthermore, BEE is important for us as well as digital transformation," he said.

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