Western Cape Business News

Send  Share  RSS  Twitter  18 Aug 2009

VENTURES: Kaap Agri Hitting its Stride


Recent Western Cape Business News

FORMER Cape-based agricultural co-oper-ative Kaap Agri – which now has PSG as a major shareholder – continues to impress in its new corporate guise.

Readers may remember that Malmesbury-based Kaap Agri was formed about five years ago with the merger of Boland Agri (then being stalked by JSE listed Afgri) and WPK. The rationale was really one of ‘unity is strength’, especially in terms of forming a regional giant that packed purchasing power.

It’s taken a number of years for Kaap Agri to really gel, but there are now clear indications the business is hitting its stride.

And for those that might think Kaap Agri is merely counting its cash from its nearly 30% stake in Pioneer Foods, think again. The group’s core trading and agri-services business is looking in fine fettle – managing to push interim turnover in the six months to end March to R1.35 billion.

Admittedly food giant Pioneer did account for a chunk of the R201 million in pre-tax profits (R93 million to be exact), but it’s not as if Kaap Agri is not standing on its own two feet.

Revenue from its Trade division (which retails to farming communities via Agrimark) was up around 10% to a sumptuous R1 billion. The trading margins were solid enough – at least by retail standards – with Kaap Agri’s Trade division showing R69 million at pre-tax profit levels.

Kaap Agri CEO Corwyn Botha points out that the strong performance from the Trade division – which accounts for 70% of the group’s operating profits - was achieved even though the inflation rate for some of the biggest turnover items (fuel, fertiliser and chemicals) was negative.

He stresses this means Kaap Agri’s retail turnover showed ‘real growth’.

Kaap Agri’s retail infrastructure covers mainly the Swartland, Boland, Wynland, Namaqualand, Orange River and South Namibia.

The biggest improvement in Kaap Agri, however, came in the Products and Seed Processing division – even though this division showed a sharp decline in turnover from R348 million in 2008 to R196 million in 2009.

This division managed to shunt up its trading margins markedly, lifting pre-tax profits from R18 million to R27 million.

Botha explained that the Products division benefited mainly from the slower sales because it meant longer storing of grain in its silos.

The sweet fruit from the stronger performance was that Kaap Agri could pay its first ever dividend of 8c/share (something which will no doubt please strategic investor, PSG, no end).

But the dividend is also a sign that Kaap Agri is looking forward to sustainable profit performances going ahead.

Botha seems hopeful when noting that the current planting season is in progress with environmental factors appearing normal.

He expects that grain plantings could be up to 12% less due to current weaker prices.

But Botha points out that the agricultural environment is less sensitive to short-term fluctuations. ‘We do not expect a significant decrease in the selling of production inputs.’

With medium term prospects looking sound, it’s no real surprise that PSG – via Zeder, its agri-business investment arm - is looking to bulk up its stake in Kaap Agri.

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