Kaap Agri rallies amid rocketing fuel, fertiliser prices

accreditation
0:00
play article
Subscribers can listen to this article
This was only the second time in 13 years that inflation in many of the group's categories was above 10% - especially high in fuel, fertilizer and chemical commodities. (iStock)
This was only the second time in 13 years that inflation in many of the group's categories was above 10% - especially high in fuel, fertilizer and chemical commodities. (iStock)

While Kaap Agri faced ongoing pressure on its retail category, its agri and fuel operations saw strong revenue growth in the six months to March 2022, CEO Sean Walsh said on Tuesday. 

During the interim period, group revenue grew by 26.7% to R7.2 billion compared to the previous comparable financial period. EBITDA, which excludes both interest received and interest paid, grew by 13.0%. Headline earnings per share increased by 13.9% to 341.61 cents. 

The results come amid product inflation estimated at just over 20%, which was mainly attributed to rocketing fuel prices. When excluding the impact of fuel price inflation, it was 9.2%. This was only the second time in 13 years that inflation in many of the group's categories was above 10% - especially high in fuel, fertiliser and chemical commodities.

The group has 228 operating units located in eight South African provinces, as well as in Namibia.

Walsh said the group's ongoing diversification strategy was yielding strong revenue and gross profit growth. 

He said the impact of the 2021/22 wheat season has been positive and agricultural conditions for the upcoming wheat season look encouraging, if weather dependent. 

Fruit and vegetable production, too, has largely been positive; however, significant expansions and infrastructural spend in these sectors have been dampened by weather events and increased input costs due to inflationary pressures. Walsh said fresh fruit exports may be under pressure this year due to additional supply chain related costs and lower market prices. 

The overall agricultural outlook is stable to positive, he added - however, wine grape producer cash flow pressure is expected to continue. 

The full impact of the war in Ukraine remains to be seen, with sanctions potentially limiting SA's exports to the Russian market. Another key concern is that Russia is the world's leading exporter of fertiliser materials.

Analyst Anthony Clark of Small Talk Daily Research says the market was reasonably pleased with the robustness of Kaap Agri's underlying performance. At close of day on Tuesday the share price was up 3.75% to R45.39. He noted that the stock had fallen from a recent near high of R58.50 when Zeder announced it was unbundling its 42% stake in Kaap Agri.

"It has bounced back in the last couple of weeks. I think as the market realised the potential of its agricultural business, moving into its third if not possibly fourth year of good agricultural recovery," said Clark. "Overall there was a very good contribution from all the underlying components."

"I think the market fails to fully appreciate the nature and transformation of Kaap Agri away from an agricultural business towards a very diversified national retail business. It is involved not just in fuel, but building materials, general retail and a strong agricultural underpin providing significant annuity income," Clark added. 


We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Rand - Dollar
17.96
-0.7%
Rand - Pound
19.39
+0.2%
Rand - Euro
17.40
-0.2%
Rand - Aus dollar
11.65
-0.2%
Rand - Yen
0.12
-0.5%
Gold
1,654.00
-0.4%
Silver
18.78
-0.6%
Palladium
2,129.03
-1.0%
Platinum
860.23
-0.7%
Brent Crude
89.32
+3.4%
Top 40
57,413
0.0%
All Share
63,808
0.0%
Resource 10
57,878
0.0%
Industrial 25
78,523
0.0%
Financial 15
14,099
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders