Kaap Agri, the JSE-listed agriculture related retail, trade and services group, remains optimistic about the outlook for agriculture in South Africa and expects a partial recovery of lost growth this year as drought conditions ease in the Western Cape region.
This optimism was reflected at Kaap Agri’s Annual General Meeting held in Malmesbury today (14 February 2019).
Kaap Agri CEO Sean Walsh told shareholders that despite last year’s drought conditions and regulatory delays in the retail fuel sector the company delivered growth in profitability and remains on track to achieve its strategic medium-term targets.
The Kaap Agri group is structured into four divisions – Trade, The Fuel Company (“TFC”) , Wesgraan and Irrigation Manufacturing – and its diversified exposure to other retail markets bodes well for healthy growth in future.
“Kaap Agri remains well positioned for growth, with the business development division focusing on projects across all channels with expansions, acquisitions, mergers and strategic alliances. We will continue our efforts to optimise the offering at existing branches, while expanding the trade, fuel and convenience footprint. Strategic outcomes are evaluated annually and we remain focused on delivering the company’s strategic intent of growing profitability that significantly outperforms inflation,” Walsh said.
During the financial year to September 2018 drought conditions had a significant impact on the company’s Wesgraan and Trade income channels. The group estimates that the drought cost 11.3% of the targeted 15% recurring headline earnings growth.
Recurring headline earnings per share have grown at a compound annual growth rate (CAGR) of 14.1% for the last five years, and shareholder value measured according to the share price, has increased by a CAGR of 18,8% over the last five years.
The Trade segment contributed 62.9% of revenue, with TFC contributing a further 27.5%, illustrating the high contribution of retail activities in the group. The Trade and TFC segments showed profit growth during the year, while Wesgraan and Irrigation Manufacturing felt the pressure of the drought.
“The fact that the trading profit contribution by retail categories has now surpassed that of agri-input supply categories is of significance,” explained Walsh. “This speaks to our strategy of diversifying the company’s retail activities, to reduce the company’s exposure to the cyclical nature of agri-input supply sales.”
Walsh said that key successes during the year included the continued roll-out of new retail store formats, continued productivity improvements in space, inventory and labour utilisation, footprint expansions in the retail fuel sector and continued year-on-year growth of building materials categories which were above the sector trends in the Western Cape.
“We remain relatively positive about the medium term growth prospects in the agriculture sector,” said Walsh. Walsh told shareholders that the company believes that expropriation without compensation will be focused on constructively addressing social inequalities while supporting commercial production in order to maintain the country’s food security status.
With regard to governance, Kaap Agri’s broad-based black shareholders now hold equity in the company worth R726.9 million.
In terms of community development, the company is committed to a continued focus on education and related programmes in support of the national priorities of the country. These programmes include:
- Improving access for female learners to job shadowing opportunities through Kaap Agri’s new Young Stars programme
- Forty-six high-school learners received bursaries from the Kaap Agri Bursary programme, now in its tenth year.
- The Kaap Agri Academy has trained over 300 emerging farmers and a further 5 330 farmworkers since its inception in 2009.
- Five percent of Kaap Agri’s shares have been issued to the Kaap Agri Employee and Farmworker BEE Trust. The income beneficiaries are farmworkers, their families, local community projects and Kaap Agri employees.
- Initiatives that address obstacles which contribute to school absenteeism, be it transport or health and well-being.
- Continued support of rural schools through donations from supplier-focused events.
“Our strategic purpose to ensure that all our stakeholders are better off because the company exists, has remain unchanged. While our strategic footprint, facilities and differentiated market approach offer competitive advantages, we uphold a people-driven culture. This culture ensures that we empower our employees and secure their commitment to our growth philosophy, that our customers are the driving force that guide our business decisions and that we are a positive force in the communities in which we operate,” said Walsh.