Kaap Agri delivers robust first quarter performance despite COVID
Posted on: 11 February 2021
The JSE listed Kaap Agri group, trading in agricultural, fuel and related retail markets in Southern Africa, has produced a robust financial performance amidst a COVID-19 resurgence during the first quarter of its current financial year to September 2021.
Statutory revenue increased by 16.9% and gross profit by 19.6% compared to the first three months of the previous year. Recurring headline earnings for the quarter grew by 35.4% from R84.0 million to R113.7 million. Headline earnings increased by 38.2% from R82.2 million to R113.6 million.
This voluntary business update was presented by Kaap Agri CEO Sean Walsh to shareholders after the group’s annual general meeting today. “The Group has traded well during Q1 driven by a strong operational performance across all divisions as well as the increase in grain trading income,” he said.
Walsh said that a recovery from the impact of COVID-19 in the second half of the 2021 financial year seems quite probable but cautioned against relying on first quarter results for full year expectations. “The group delivered a great first quarter performance, and whilst the overall outlook for the year is encouraging, one should temper full year expectations somewhat. Recurring headline earnings performance is not expected to repeat to the same degree going forward."
The group is positive about the overall outlook for agriculture. Agri-related revenue grew by 3.5%, compared to the previous year. Expectations for fruit farming are very positive, whilst a record wheat, barley and canola harvest is currently in storage. Kaap Agri’s grain division operates 14 silo complexes which experienced their largest wheat harvest intake in 10 years. The group expects that wine grape farmers may experience cashflow pressure as a result of the impact of COVID-19 regulations.
Growth in certain retail categories is expected to continue, however, the COVID-19 impact on quick service restaurant (QSR) performance may linger. Retail fuel sales are expected to perform positively. Retail related revenue grew by 14.5% compared to the previous year. Total group fuel litre growth of 11.8% was achieved in the three months, despite the December 2020 impact of the COVID-19 pandemic.
Walsh said Kaap Agri delivered strong cash flow from operations in the first quarter. The focus on good working capital management and enhanced return on invested capital remains strong, and capital investment was less than R10 million. The debtors position remains healthy with debtors not within terms decreasing as a percentage of total debtors during the period under review.
Kaap Agri recently introduced a refreshed logo and consolidated its trade and retail businesses under one brand. Agrimark is being positioned as the main customer facing brand with the group’s trade and retail businesses all adopting the Agrimark brand name. New growth projects will also carry the Agrimark name, like Agrimark Pet, the group’s new standalone pet store, the first of which was opened in Cape Town in December last year.