100 years in the ser­vice of agri­cul­ture

Many don’t nec­es­sar­ily want to list

Finweek English Edition - - Agri-businesses -

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

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