Zeder back in the black, still considering 'third-party approaches'

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The disposal of Zeder's investments in Pioneer Foods and Quantum Foods and the declaration of special dividends during the past 18 months, resulted in a material change to the size and composition of the group.
The disposal of Zeder's investments in Pioneer Foods and Quantum Foods and the declaration of special dividends during the past 18 months, resulted in a material change to the size and composition of the group.
  • Zeder has reported a half-year headline profit, from a loss last year.
  • The company says it is still considering "third-party approaches" for some of its businesses.
  • An analyst thinks Capespan and The Logistics Group may be the most likely targets. 

Zeder - which holds stakes in fruit company Capespan, the agriculture trade group Kaap Agri, as well as other agribusinesses - is back in the black for the six months to end-August. The company is still considering "third-party approaches" to buy some of its assets.

After a headline loss of 14.3 cents per share in the same period in the previous year, the group reported earnings of 31.4 cents this year.

Zeder's net asset value per share increased by 19% from R3.73 per share at 31 August 2020 to R4.45 cents per share at 31 August 2021. On Wednesday, its share price was up almost 4% to R3.28.

Zeder's underlying investment portfolio was valued at R6.1 billion on 31 August 2021, an increase of 7% from 28 February 2021. This was mainly as a result of increased valuations of The Logistics Group and Kaap Agri.

"On a relative basis, our portfolio companies appear to be better positioned than most companies with regards to the Covid-19 risks. It, however, remains difficult to predict the business environment that will unfold in the short to medium term," said CEO Johan le Roux during a virtual briefing on Wednesday.

Le Roux said the disposal of Zeder's investments in Pioneer Foods and Quantum Foods and the declaration of special dividends during the past 18 months, resulted in a material change to the size and composition of the group.

This necessitated the Zeder board to reconsider its future strategy. During this process, Zeder received "third-party approaches on various portfolio investments", which the board is currently evaluating.

"Good progress has been made in this regard, but unfortunately Covid-19 has led to delays in certain instances. Any potential value unlock will be executed in an appropriate and responsible manner in an attempt to maximise shareholder value," said Le Roux. 

"The positive climatic environment and demand for commodities should contribute to improved trading conditions in the medium term and Zeder's portfolio companies are well positioned to benefit. This, combined with the healthy cash reserves on hand and focus on additional value unlock options, should allow us to deliver attractive returns."


Zeder subsidiary Zaad, which has a seed business, reported recurring headline earnings of R177 million, while The Logistics Group reported recurring headline earnings of R90 million, an increase of 186% from the prior comparative period, due to higher mining and citrus export volumes.

Fruit producer and marketer Capespan, however, reported a loss of R56 million from the prior comparative period loss of R27 million. The upcoming grape season looks promising, however, and Capespan management has been proactive in planning for any potential disruptions as a result of supply chain constraints, Le Roux said. The availability of cold storage containers has been a concern, in particular.

Retailer Kaap Agri saw recurring headline earnings per share increase by 23% for its six-month period ended 31 March 2021. 

Agrivision Africa, which does commercial farming and milling in Zambia, is currently performing "above expectations", according to Le Roux, mainly due to improved crop yields and commodity prices.

Jan Meintjes, portfolio manager at Denker Capital, regards the Zeder results as "acceptable in a difficult environment". 

"Kaap Agri is the best performing asset in the portfolio currently and we expect this to continue for a while. The three remaining meaningful businesses are being impacted by the global supply-chain disruptions and continuing Covid-19 impacts," says Meintjes.

"It is unfortunate to see that Capespan cannot fully benefit from the booming citrus industry in SA. Hopefully when container flows and shipping schedules normalise we can see the benefit coming through in the numbers."

Independent analyst Anthony Clark of Small Talk Daily says the market was generally quite pleased with Zeder's interim results.

"Looking at the results in context, there was not much to actually speak about. The only material change was in TLG, which saw an increase in value. Furthermore, on 9 September 2020, Zeder announced a strategic review, but nothing has happened since then and we still have no idea of the direction it is going into," said Clark.

"Then, on 14 April this year Zeder announced a cautionary, stating it has 'unnamed bidders', but more than six months later nothing has happened. I wonder how much longer they need," he asks. In his view, the potential interest was most likely expressed either in TLG or Capespan.

"TLG is a very well run ports and logistics operation, which will fit in very nicely inside any existing logistics operation and/or any private equity interest," says Clark.

"As it stands right now, there remains material upside in Zeder. I have been bullish on the stock since September last year when they announced their strategic direction change, but nothing has happened. All in all, fair results, although no great shakes regarding any news."

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