Kaap Agri remains on track to achieve inflation-beating growth in the medium term. While the past two years were not without challenges, Kaap Agri continues to be positive about the medium-term outlook for agriculture in Southern Africa.
Addressing shareholders at Kaap Agri’s Annual General Meeting held in Paarl on 13 February 2020, Kaap Agri CEO Sean Walsh says that the group achieved growth in profitability in the financial year to September 2019, despite lower infrastructural development on farms, prolonged recovery from the drought, marginal improvements in fruit harvests and a mid-year retail sales slump.
Although revenue growth of 29,1% was above industry trends and showed healthy top-line growth, it was driven by fuel price inflation and growth from investment activities. This resulted in growth of 6,6% in recurring headline earnings.
For reporting purposes, Kaap Agri is structured into four operating segments, namely Trade, The Fuel Company (TFC), Wesgraan and Manufacturing. Trade contributed to 58,8% of revenue and TFC a further 29,1%. Wesgraan’s operating profit grew by 113,8%, a direct result of recovery in the wheat intake after the prior year’s drought. Manufacturing had a flat year affected by lower-than-expected agri-infrastructure spend on farms.
“While various areas of Southern Africa continuously experience drought, the company’s diversified exposure to other retail markets bodes well for sustainable growth,” Walsh says.
In support of the growth and optimisation of retail stores, Kaap Agri implemented JDA, a world-class supply chain system. The group also initiated a centralised buying project, working towards moving retail stock replenishment from the stores to a centralised supply chain function.
Costs related to items supplied by the Kaap Agri distribution centre were reduced by 10%, and the group’s centralised fuel logistics operation was responsible for the movement of approximately 200 million litres of fuel to 89 outlets nationally without a single pump ever running dry.
In support of further building on customer relationships, an agriservices and relationship team was established to enable customer procurement decisions based on solutions-driven advice and guidance.
From a TFC perspective, 287 more people were employed this year, fuel volumes grew by 10,4%, and store revenue grew by over 50%. TFC’s footprint expanded with the addition of five new service stations.
Kaap Agri’s BEE accreditation level was also improved from level 7 to level 3. Leveraging culture and diversity remains a key differentiator for unlocking further growth opportunities and is a major strategic focus area for the group. – Press release, Kaap Agri