Food producers

This year's food producer story – like last year’s – is one of quite decent performances by almost all 14 listed companies in the sector.

Those companies – consisting of the sub-sectors of farming, fisheries and the capitally more powerful food producers – not only benefited from the market’s better investment mood but also from international food prices, which are still not doing too badly.

Only AfroCentric (previously known as WB Holdings) recorded a poorer share price in February this year versus that of a year ago (150c against 170c).

Though illiquid (only 2.8% shares/year were traded) it wasn’t a failure: its attributable profit of R34.7m in its latest full financial year to end-June 2009 was substantially better than the R10.8m and R4.7m for its two previous financial years.

Gaining weight

The sector’s market capitalisation (minus small fry Conafex, which was delisted on 9 April 2009) increased from around R66bn in February last year to R90.9bn at end-February this year, which means a 38% increase for the sector.

Sovfood (its price rose from 500c to 830c/share, or 66%), Pioneer Foods (+58%) and Afgri (+44%) had excellent years and they closed the 12 months significantly better than the sector average.

Pioneer lost some value since its listing on 22 April 2008, which brought its market capitalisation down from just more than R5bn to around R4.9bn (calculated at 2 460c/share) and then rose steadily to approximately 3 800c in February this year – despite a R195m fine hanging over its head.

That pushed its market capitalisation up to R7.8bn, making it the fourth-largest in the sector and a short head in front of AVI (R7.5bn) and more than R2bn larger than Rainbow’s market cap of R5.5bn in February.
 
Brand power

Pioneer, one of SA’s top former co-ops, has therefore developed into one of SA’s recognised players in the food and beverages industries due to, among other things, a range of SA’s best brand names.

Everyone knows its subsidiaries Sasko, Bokomo and Ceres and their well-known products Sasko Sam, Weet-Bix, ProNutro, Bovril, Marmite, Redro and Pepsi.

Pioneer therefore looks good and can be expected to continue on its path of growth and prosperity.

Another one of SA’s former co-ops – Afgri – fared quite well in its latest full financial year to end-June 2009 and, despite an approximately R1.2bn fall in turnover, increased its attributable profit slightly to R233m.

Its share price responded well.

Tiger Brands, whose market cap of R32.8bn in February made up around 36% of the value of the entire sector, also just remains one of the market’s stalwarts.

Eenie meenie mini mo

Over the past year its share price rose by 28% and it remains one of the food groups favourably geared to exploit the global food boom to the benefit of itself and its shareholders.
 
Though Tiger Brands didn’t succeed in its bid to take over AVI it strengthened its interest in the world of food production over the past year by acquiring Crosse & Blackwell.

Expansion possibilities in a fairly undeveloped Africa also look good.

The prices of Illovo and Tongaat, which have strong interests in the sugar industry, didn’t disappoint either, increasing by 27% and 42% respectively.

Both have large foreign interests and a weaker rand could boost these earnings.

Though the sugar price fluctuates, the price trend is upward.

Crookes, which is almost 100 years old and has been doing its thing quietly since listing in 1948, also depends on sugar for around 50% of its income and profit.

Old hand

People like to complain about its liquidity (only 3.5% over the past year), but if you can get hold of its shares you’re likely to hold on to them.

Over the past year to February they increased by 16% to 5 200c/share.

Country Bird Holdings, one of the newest listings in the food sector, also fared better after suffering in the previous year.

Its price increased sharply from last year’s 231c to 355c/share (+54%). However, it should be remembered it had fallen from 500c to below 300c.

In its financial year to end-June 2009 it showed great promise when both its turnover and attributable profit rose sharply.

Be sure to keep an eye on it.

Just a little afterthought about Senwes, the large unlisted food producer in Klerksdorp.

Senwes – which turned around admirably from an absolute low and near-bankruptcy in 2000/2001 and is now growing consistently – has achieved good results, especially over the past five years.

Senwes is starting to look increasingly like a good stock market candidate and many investors would like to see it there.

 - Finweek
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