Kaap Agri positioned for another year of solid growth in earnings

KAAP AGRI, which trades in the agriculture, general retail and fuel retail sectors, lifted revenue 48.4% to R15.7 million in the year to September 30 off the back of a 54.3% increase in the number of transactions and higher fuel prices.

Compared with pre-Covid-19, revenue increased at a compound annual growth rate of 22.9%. Chief executive Sean Walsh said in a telephone interview that the sharp increase in fuel prices from the 370 million litres of fuel sold through their service stations drove revenue growth, but like-for-like growth was nevertheless “solid” at 24% over the year.

He said the results were despite significantly higher farm input costs that resulted in pressure on agricultural producer’s cash flow. This was accompanied by tighter consumer spending, while a recovery of fuel volumes was muted by soaring prices and lower consumption. Commercial and commuter fuel consumption had slowed between 7% and 13%, and the impact was mainly in commercial diesel consumption.

He said in normal trading periods, fuel volume increases tended to be very low but, for example, the exposure to the 41 PEG Retail Holdings fuel retail sites also gave the group access to 180 retail touch-points, where revenue growth was much faster.

He said Kaap Agri over the past seven years had diversified from a largely agri-focused business to a diversified group with trading activities in agricultural trade, general retail, retail fuel, fuel convenience and quick service restaurant markets.

Seven years ago agricultural trading made up 60% to 70% of the group’s gross profit, but this percentage had reduced to 30% even though their exposure to agriculture had also doubled over the period, said Walsh. The company’s customer base has expanded from mainly farmers to also include families, friends, and their fur family.

The group’s footprint of 272 business units includes the service stations operated by PEG, which was acquired in July. As such, three months of PEG performance was included in the period under review.

The fuel subsidiary, The Fuel Company, excluding PEG, had performed well with litres falling by only 2.3%. The addition of PEG was expected to have a significant positive impact on fuel volume growth.