FOOD & BEVERAGES: Capespan Takes A 2nd Half Pounding
Recent Western Cape Business News
FRUIT exporting group Capespan’s prediction – at the release of promising interim results in 2009 - that the global financial crisis would not have such a severe impact on business did not quite pan out.
The Bellville-based group took a pounding in second half trading, finishing the 2009 financial year with operating profits down over 50% to R83 million in spite of a 6% hike in turnover to R2.6 billion.
Capespan MD Neil Oosthuizen says price pressures in the market affected global marketing of fruit. “All the main supermarkets wanted to ensure that they offer their general client base, who was under severe financial pressure, the lowest possible prices.”
He says this resulted in much lower selling prices being achieved - contrasting the previous marketing period. Oosthuizen explains that the overall demand for fruit was not down, but he noted “certain shifts” regarding fruit types, specification and packaging.
He says a further factor impacting on Capespan’s performance is the rand exchange rate, which strengthened during the year against the major trading currencies. “This resulted in grower returns (in rands) coming down on average by between 12% to 21% depending on the fruit kind. This, in turn, had a major negative impact on our income.”
Oosthuizen says SA fruit industry volumes exported decreased by around 6.5% in 2009 with the reduced citrus crop being the major contributor.
Capespan marketed 54 million cartons of fruit sourced from 40 different countries. This compared to the 55.2 million cartons in 2008 (representing a 2% drop year on year). He says the main contributor to this situation was the overall reduction in our South African volumes.
Encouragingly, the drop in SA volumes was partially off-set by the growth in non-RSA fruit. Oosthuizen discloses that of the total fruit marketed by Capespan, around 37% was sourced from outside SA. This is a figure that was increasing year after year.
In his divisional review Oosthuizen notes that all divisions showed major reductions in profitability with the biggest percentage reduction coming from the Fruit Division.
The Logistics Division again made the largest contribution to the overall result with an adjusted profit before tax contribution of R59 million from turnover of R673 million.
The Fruit Division produced a pre-tax loss of R11.6 million (2008: a profit of R27.5 million) from turnover of R2 billion. But at bottom line the division showed a R5 million profit – adjusted for associate’s tax and exceptional items. Of the 13 major companies in the Capespan group, three were loss-making.
He is most pleased with the performance of Capespan UK, which returned to profitability after showing a loss in financial 2008.
Other Capespan companies that showed good profit growth year on year were Fisher Capespan in North America, Metspan in the Far East and Matola Cargo Terminal (MCT) in Mozambique.
Looking ahead to the 2010 financial year, Oosthuizen stresses that Capespan’s main business focus remains to be a leader in the global marketing of fresh produce and provider of supply chain service solutions. But he adds that many of the traditional business streams that Capespan has been involved with in the past are undergoing change.
“Various external factors have played a role and we think of trends like direct sourcing by retailers, grower-exporters, containerisation…Therefore, growing the business in various other areas of involvement will remain an important strategy.”
Oosthuizen says during 2010 Capespan needs to conclude its expansion plans into the Chinese and Indian fruit markets. Developing the company’s non-RSA fresh produce sourcing will also require investment in resources to give the strategy the necessary impetus.
Oosthuizen is also bullish about the Logistics Division and believes there are many opportunities for Capespan to expand into related business areas. “Mozambique, in particular, offers some interesting options and MCT will build on the success of 2009 and further expand its bluechip list of customers to others in need of warehousing and distribution services.”
After some good results in 2009, Oosthuizen says Capespan’s Fresh Chain would be looking at growing its customer base and further increasing its fruit volumes and profitability.
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