Western Cape Business News

Send  Share  RSS  Twitter  18 Oct 2010

FRUIT: Capespan Slips Into The Red


Recent Western Cape Business News

BELLVILLE-based fruit exporting giant Capespan, which appeared to be holding up fairly well in recessionary trading conditions, slipped into the red in the half-year to end June 2010.

Although the comparison is probably not fair, one cannot but contextualise Capespan’s performance by noting that KWV Holdings – another export heavy former co-operative – fared far better over in the second half of its full year to end June.

Revenue was down 13% at R1.16 billion with the strong rand dampening sales revenue. At constant exchange rates the picture was slightly better with the group reporting revenue down only 2% at R1.3 billion.

Capespan acting MD Louis Kriel says during the first half of 2009 the group generated good results despite the global economic meltdown.

But he explained that the impact of the global financial crisis only started to affect Capespan in the latter half of 2009.

The world outside of fruit is recovering from the crisis but the fruit trading environment is lagging and trading conditions remains difficult in certain key markets.”

He says erratic fruit supply patterns as a result of unseasonal weather in South Africa and other source countries also hampered the interim performance. Probably the most worrying aspect of the interim performance is that trading margins were badly eroded, leaving a mere R2.6 million in pre-tax profits compared with the hefty R77 million recorded in the corresponding interim period in 2009. The after tax line showed a loss of R2.2 million (previously R52.5 million).

Things don’t exactly look promising for the second half either. Kriel says the remaining six months will be challenging for Capespan – although he does expect the group will generate a reasonable profit in spite of dour global trading conditions and the continued strength in the rand.

We are continuing to focus on growing our revenue and our footprint and in this regard there are certain acquisitions that are being pursued.” (See accompanying article of Capespan’s Far East expansion.)

The breakdown of Capespan’s interim performance shows strain across most operations.

Kriel says the Logistics Division showed a 21% decrease in revenue as a result of the reduced revenues generated from shipping activities.

But he points out that the previous year’s performance included revenues of R120 million from vessels operated on long-term charter. “The decline in the Logistics Division is as a result of the shipping activities in the prior year generating significant profits in the first half of the year, due to the cyclical nature of the market, which were not repeated as we have no vessels on long-term charter.”

The Fruit Division’s revenues increased marginally by 0.3% but fared much better on a constant currency basis with 6.2% growth being achieved.

Kriel says there was good growth in North America and farming operations – although these gains were offset by a reduction in Japanese markets.

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