The JSE-listed Zeder, with investments in the broad agribusiness and related industries and a historical focus on the food and beverage sectors, reported an 11% increase in its sum-of-the-parts (SOTP) per share to R6,25 as at 31 August 2019 for the six months to August this year.

The SOTP value per share is calculated using the quoted market prices for all JSE-listed investments, and internal valuations for unlisted investments. At the close of business on Monday, 30 September 2019, Zeder’s SOTP value per share was R6,22.

Investing in Pioneer Foods

Announcing the results, Zeder CEO Norman Celliers said that from a valuation perspective the impact of the PepsiCo offer ensured an improvement at an aggregate level.

Norman Celliers, CEO of Zeder.

The announced all-cash offer from PepsiCo to fully acquire Pioneer Foods had a positive impact on the share price of Pioneer Foods.

In turn, this had a positive effect on Zeder’s SOTP value during the period under review.

Zeder’s 28,6% interest in Pioneer Foods remains its largest investment, representing 51,2% (28 February 2019: 43,5%) of the portfolio.

“However, the overall market sentiment towards Zeder and the sector it operates in continues to be negative due to the prevailing challenging macro conditions and has resulted in continued subdued valuations across the remaining portfolio and Zeder’s own share price.

Zeder stays on top of difficult trading conditions

Recurring headline earnings per share decreased by 63% to 3,6 cents mainly due to the weaker performance of most of Zeder’s investments, following continued challenging trading conditions experienced by the agricultural, food and related business sector.

“From an earnings perspective, it should be noted that the interim reporting period traditionally represents the lesser half of Zeder and its portfolio’s annual earnings. This period reflects the annual input-cost cycle associated with many of its agriculture investments as well as the softer half of the annual trade sales and spending cycles associated with its other investments.

“Year-on-year comparisons at the interim stage of reporting may, therefore, reflect seasonal variances. Notwithstanding these seasonal variances, the reality is that Zeder’s portfolio continued to trade under extremely difficult conditions,” Celliers said.

It is currently Zeder’s policy to only declare a final dividend at year-end.

Zeder to distribute more than R4,25 billion to shareholders

Celliers said that the contemplated disposal of its interest in Pioneer Foods to PepsiCo, in terms of the announced offer, was approved by an overwhelming 99,65% of voting Zeder shareholders at a meeting held on 30 September 2019. Zeder will therefore now proceed to vote in favour of this transaction at a general meeting of Pioneer Foods shareholders scheduled for 15 October 2019. The final implementation of this transaction remains subject to further terms and conditions.

The offer consists of a cash consideration of R110 per Pioneer Foods ordinary share. It is anticipated that Zeder will receive approximately R6,4 billion through this disposal with net cash available following the settlement of certain obligations amounting to approximately R4,82 billion.

It is anticipated that Zeder should be able to distribute between R4,25 billion and R4,75 billion to shareholders and invest the remainder of the net proceeds into its existing portfolio or new opportunities.

Zeder’s investment in Zaad

Regarding the company’s investment in Zaad, as a strategic holding company that invests and operates in the specialised agri-inputs industry with a focus on emerging markets, Zeder has committed an additional R300 million investment in the company to enable two transactions.

Zaad acquired all the remaining shares in Farm-Ag on 1 September 2019. The company also concluded transaction agreements whereby it will acquire a 40% stake in the EAS group of companies (EAS) in Kenya, with an option to acquire an additional stake in the future.

Zeder valuations to remain subdued

About prospects, Celliers said the negative macro conditions are likely to remain unchanged in the short to medium term, but will inevitably improve over the longer term. As a result, earnings and valuations at both a Zeder and portfolio level are expected to be subdued during the next reporting period.

“Notwithstanding these challenges, and particularly in light of the anticipated Pioneer Foods disposal, Zeder should be in an improved position to create value for its shareholders through this cycle.

“It is anticipated that the substantial cash proceeds will enable Zeder to return capital to its shareholders, while also actively investing in its existing portfolio and new opportunities when opportune.

“We remain committed to deliver sustainable returns to our shareholders,” Celliers concluded. – Press release, Zeder