Kaap Agri weathers the storm through diversification

KAAP Agri said yesterday that diversification was a key factor in its results for the year to the end of September after reporting an increase in profits, despite its exposure to the agricultural sector.

Kaap Agri, the agriculture-related retail, trade and services group, released its maiden results yesterday. It listed on the main board of the JSE in June.

Revenue for the year increased 13.63 percent to R6.42 billion, up from R5.65bn.

Recurring headline earnings per share rose 17.9 percent to 351.9 cents a share, up from last year’s 298.4c, resulting in a compound annual growth rate of 18.9 percent in the five years to September.

Recurring headline earnings also increased by 17.9 percent to R247.9 million, up from R210.3m reported a year earlier.

The group declared a total dividend of 112c, up from 94.5c, an increase of 18.5 percent.

Chief executive Sean Walsh said the results were satisfactory, given that agriculture remained heavily impacted by climatic and general macro-economic conditions.

“Kaap Agri’s ongoing diversification strategy has, nevertheless, resulted in strong retail and fuel growth across a number of categories and has contributed substantially to the overall strong trading results of the group,” he said.

Walsh said the drought had not negatively impacted the results in this period.

He said the drought would come into play in the group’s first-half results of 2018. However, the group’s exposure in a variety of sectors would cushion it.

“The group’s diversification drive over the past few years, mainly into the three growth areas of general retail, agricultural-related retail and fuel retail, has gained further traction.

“In the period under review, the trading profit from general retail was similar to that of agricultural-related retail. Indications are that general retail growth will exceed growth in agricultural retail in future,” Walsh said.

The group said nearly 90 percent of Kaap Agri’s business flowed from these three areas and “we are set to continue to deliver ongoing growth”.

Diversification The group operates in seven of South Africa’s nine provinces and in Namibia.

It said regional diversification also lessened its exposure to the cyclical climatic conditions.

The group expects that the retail business will continue growing as upgrades, expansions and improvements contribute more significantly.

“Retail fuel growth will remain an aggressive part of the group’s expansion strategy, while agricultural conditions have shown improvement in specifically the northern areas of the country, but remain under pressure in the Western Cape. The ongoing drought conditions in the Western Cape and especially the impact of it on the fruit industry might slow revenue growth from this sector next year,” Walsh said.

Kaap Agri’s shares lost 0.31 percent on the JSE yesterday to close at R47.80.