South Africa’s Kaap Agri grows revenue 28.7% to US$310.74m as conditions recover

SOUTH AFRICA – Kaap Agri, a South African agriculture group, reported a 28.7% in half-year revenues were up to US$310.74 million (R4.4bn) in the six months to end-March this year.

The company, which trades in the agricultural, fuel and related retail markets in Southern Africa said net profit rose 3% in the six months period reflecting the company’s recovery from drought conditions especially in the Western Cape.

The addition of the Forge business in KwaZulu-Natal, and market share gains in the inland region “have positively impacted the trade division”.

The group’s posted US$11.38 million (R161.2m) in net profit for the period up from US$11.03 million (R156.2m) a year before.

However, the firm said that its recovery from the Western Cape drought has been slower than anticipated.

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Wesgraan, which includes grain handling and storage of grain and related products, seed processing and potato seed marketing, grew revenue by 26.6% off improved wheat harvests in the Western Cape, resulting in a 16.8% increase in operating profit before tax.

Revenue from the agri and retail trading division, which includes the Agrimark retail branches, Pakmark packaging material distribution centres, Forge, mechanisation services and spare parts, increased by 24.1%, with operating profit before tax increasing by 0.7%.

The group’s gross profit margin was reduced to 15.5% from 17.3%, “impacted by increased turnover of low-margin agri-products, fuel price increases, and general retail margin pressure”, it said.

“The second half of the year will remain challenging and improved performance will be dependent on normalised weather patterns and increased consumer confidence.

“Our footprint expansion continues, as will our investment in our people and in selective revenue and cash-generating expansion and acquisition opportunities aligned with our strategic plans,” the company said.

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Kaap Agri said the growth in revenue was mainly driven by a 21.9% increase in the number of transactions. Product inflation, excluding the impact of fuel inflation, was slightly negative.

“More private investment is paramount, as investment by government alone will not bring an economic recovery. More confidence and positivity is also needed in the retail environment for growth.” Kaap Agri’s chief executive, Sean Walsh, highlighted.

Revenue from irrigation manufacturing decreased by 5.3% due to the lingering drought-related impact on capital investments and upgrades, while operating profit reduced by 27.9%.

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