Kaap Agri sees strong interim growth

Kaap Agri sees strong interim growth


KAAP AGRI, the agricultural goods and fuel retailer, saw higher-than-expected retail product sales growth and a strong contribution from the new TFC retail fuel sites during the six months to March 31, chief executive Sean Walsh said yesterday.

The share price of the 108-year-old company extended recent sharp gains and was up 3.5 percent to R44.01 by midday yesterday, this after the price had risen from R36.03 on April 16. A year ago, the share price was R21.78.

The Agri channel performance was stable and increased during the second quarter. Kaap Agri’s branches serve mainly the fruit industry in the Western Cape.

The fruit industry had a good season, and it looked as if they faced another good season, “which bodes well for them to spend more with us”, Walsh said.

He said in an interview that the retail categories that had grown well in the period included building materials, pet and accessories, pool and garden and other DIY products, which were all categories where sales had fallen during the lockdowns of last year.

Traditionally, some 60 percent of turnover was derived from agricultural sector product sales, but the diversification had been such that 56 percent of operating profit came from retail product sales.

Walsh anticipated that the stronger growth trend of the retail product categories would continue into the second half.

Kaap Agri lifted revenue by 15.6 percent to R5.7 billion in the six months, with like-for-like comparable sales growth of 1.6 percent. Headline earnings per share increased 24 percent to 299.96 cents per share.

An interim dividend of 40c per share was declared, versus nothing declared in the prior corresponding period.

The growth in revenue was driven by an 8.6 percent increase in the number of transactions. Product inflation, excluding the impact of fuel inflation, was estimated at 2.2 percent. Costs were well contained and cash flow well managed, said Walsh.

“We continue to experience the positive impact of the 2020/21 wheat season, and conditions for the upcoming wheat season look encouraging, although always weather dependent,” he said.

Fruit and vegetable production was largely positive, but expansion and infrastructural spend had slowed, partly due to Covid-19-related cash flow curtailment, as well as ongoing concerns around land policies, with the main agri focus being on replacement infrastructure spend.

The fuel industry had experienced significant fuel volume pressures throughout the various levels of the lockdown.

Group fuel volumes increased by 11.9 percent, of which TFC-owned and managed sites had grown fuel volumes by 8.3 percent.

Fuel site convenience and quick service restaurant performance lagged fuel volume growth in like-for-like sites because of Covid-related restrictions.

“Retail sales have rebounded, especially building materials, and general agricultural conditions in the areas we operate in bode well for the second half of the financial year,” the company said in a statement.

Fuel price inflation would weigh on trading margins. No new retail fuel sites were planned for the rest of the financial year.

The first six months’ earnings traditionally contributed more to full-year earnings than the second six months, but Walsh said management was positive about the continued healthy performance of the business during the coming six-month period.

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