100 years in the service of agriculture
Many don’t necessarily want to list
THOUGH MOST OF SOUTH AFRICA’S agricultural co-operatives have been converted to companies since the Nineties, a few remain that haven’t taken that option. Many have no intention of doing so and are quite satisfied with their status as unlisted public companies. Some of them – such as Free State Co-operative in the eastern Free State and North Cape Lifestock – still prefer the co-op structure.
In 2009, several of these businesses will be 100 years old. The large unlisted agricultural company Senwes is one of those that originated as a co-op in 1909, changed its name several times since and also changed its business form late in the Nineties. NTK, in Limpopo, another of SA’s best-known co-ops, will also hit 100 in two years’ time.
However, Clover, the dairy company with extensive interests in SA and southern Africa, was formed in Natal in the 1890s and is regarded as SA’s first fully-fledged co-op. It was previously known as NCD.
The co-op movement had picked up a lot of momentum in SA by 1909 and dominated the agricultural industry until the Nineties, the decade in which the largest group switched to the company format.
Some of these agri-businesses have turnovers of several billion rand – more than many listed companies. Senwes (of Klerksdorp), NWK (Lichtenburg) and Western Cape Pioneer Foods, to mention only three, could easily slot into the sector for food producers and processors and they’ve long been urged to list. However, since Zeder Investments – which has large interests in some of those and other promising agricultural groups – was listed last year it’s possible to share indirectly in their prosperity.
Pioneer Foods MD André Hanekom, in particular, usually tends to be pretty vague concerning possibly listing the company. His friendly, standard reply is usually something like: “Yes, Pioneer may list later. But that’s not necessarily the route we’ll go.”
Hanekom says that Pioneer doesn’t need large share issues at this stage to continue its acquisitions successfully but can finance them comfortably from its own resources. It already owns one of the most impressive series of brands in SA, including Sasko, Bokomo, Ceres, Liqui-Fruit, Weet-Bix, ProNutro, Safari, Marmite, Bovril and Heinz. It’s also the SA distributor of PepsiCo’s range of soft drinks, which include Pepsi, Mirinda and 7-Up.
The growth in Pioneer Foods’ turnover and profit seems unstoppable. Whereas it was still around R5bn in 2001, it passed R8bn last year. That compares with listed companies such as Afgri (turnover of about R6bn), Rainbow (R4,1bn) and Tongaat (R7bn) in the food sector.
The turnover of NWK, formerly known as North-West Co-operative, also already exceeds R2bn. In its 2006 financial year that figure shot up by 24,6% to R2,56bn and its net operating profit increased from R106,6m to R143,1m. NWK says it has no listing plans, but at least some of its approximately 143m issued shares are available over the counter.
NWK is an important agricultural service and input provider in North West province and its customers are largely agricultural producers. It also has a strong industrial division, which presses and bottles sunflower oil and manufactures liquid fertiliser, dog food and animal feed.
The South-West group (of Leeudoringstad), MGK (of Brits) and Senwes (Klerksdorp) are three more agricultural companies with major agricultural interests in North West and surrounding provinces. All three are former co-ops with large interests in grain and stock farming in their regions.
South-West and MGK aren’t thinking of listing, but Senwes has indicated that it will probably do so in a year or two. Senwes, which achieved the largest turnover of all SA’s grain co-ops in the Eighties, has progressed well over the past three years with its turnaround effort, which followed after it recorded considerable losses at the end of the Nineties and the following year or two.
Agri-businesses are leaner and more efficient
than a decade ago.
Its latest results, for the six months to endOctober 2006, were again very good under difficult agricultural conditions, resulting in an operating profit of R141m – 23% better than in the corresponding period in the previous year – and ensured a positive cash flow of R72m. An interim dividend of 6c/share was paid.
According to Senwes’s financial division, one big breakthrough was the fact that the division for input provision made a R36m profit after being in the red in the previous year. That was thanks to a larger turnover but also to its restructuring over the previous two years.
Like Senwes, several other agri-businesses are leaner and more efficient than they were only a decade ago. It helps when food can continue to be produced affordably in SA.
Vague about listing. André Hanekom