Kaap Agri has produced a robust financial performance amid a Covid-19 resurgence during the first quarter of its current financial year to September 2021.
Statutory revenue increased by 16,9% and gross profit by 19,6% compared with the previous year’s first three months. Recurring headline earnings for the quarter grew by 35,4%, from R84 million to R113,7 million. Headline earnings increased by 38,2%, from R82,2 million to R113,6 million.
Kaap Agri CEO, Sean Walsh, presented this voluntary business update to shareholders following the group’s annual general meeting.
Remaining positive in the midst of a pandemic
“The group has traded well during the first quarter, driven by a strong operational performance across all divisions as well as the increase in grain trading income,” he said.
Walsh said recovery from the impact of Covid-19 in the second half of the 2021 financial year seems quite probable. However he cautioned against relying on first quarter results for full-year expectations.
“The group delivered a great first quarter performance, and while the overall outlook for the year is encouraging, one should somewhat temper full-year expectations. Recurring headline earnings performance is not expected to recur to the same degree going forward.”
The group is positive about the overall outlook for agriculture. Agri-related revenue grew by 3,5%, compared with the previous year. Expectations for fruit farming are positive, while record wheat, barley, and canola harvests are currently in storage. Kaap Agri’s grain division operates 14 silo complexes, which experienced their largest wheat harvest intake in ten years. The group expects that wine grape producers may experience cash flow pressure due to the impact of Covid-19 regulations.
Expectations for continued growth
Growth in certain retail categories is expected to continue. However, the impact of Covid-19 on quick service restaurant (QSR) performance may linger. Retail fuel sales are expected to perform positively. Retail related revenue grew by 14,5% compared with the previous year. Total group fuel litre growth of 11,8% was achieved in the three months, despite the coronavirus pandemic’s effects during December 2020.
Walsh said Kaap Agri delivered strong cash flow from operations in the first quarter. The focus on good working capital management and enhanced return on invested capital remains strong, and capital investment was less than R10 million. The debtors position remains healthy, with debtors not within terms decreasing as a percentage of total debtors during the period under review. Kaap Agri recently introduced a refreshed logo and consolidated its trade and retail businesses under one brand. Agrimark is being positioned as the main customer-facing brand with the group’s trade and retail businesses all adopting the Agrimark brand name. New growth projects will also carry the Agrimark name, such as Agrimark Pet – the group’s new standalone pet store, the first of which was opened in Cape Town last December. – Press release, Kaap Agri