Tuesday, January 18

Kaap Agri Reports Revenue Growth; returns to normal dividend payments

FIFI PETERS: Kaap Agri, a company that specializes in the retail and trade of agricultural and fuel-related products, paid a dividend of R11.10 per share on this occasion. This is more than double the payout in 2020. That’s when the group’s revenue jumped 23% to R10.6 billion and profits soared beyond pre-pandemic levels.

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Let’s talk to Sean Walsh, the CEO of Kaap Agri to dig into the numbers. Sean, thank you very much for your time. What is driving your earnings so strongly and how sustainable is this growth momentum?

SEAN WALSH: Good evening, Fifi, and thank you. Yes, we believe it is sustainable. We found that our diversified footprint growth strategy in recent years is driving 14% agricultural retail activity growth, 18% general retail activity growth, and 13% fuel volume growth for this year, with an INTER for the future. …… 1:12 a 12% growth is expected next year. We found that, from a divisional point of view, we have a lot of stars this year, but also, all the channels are working very well for us.

FIFI PETERS: Given that it is growing so strongly and has even grown beyond the years leading up to the pandemic, would you say that your business is immune to the pandemic, even when we have this conversation with news and confirmation of the discovery of a new [Covid] variant here in South Africa?

SEAN WALSH: Well, we have been fortunate that throughout the pandemic agriculture has held its head high and has really performed well. We supply inputs to that sector and therefore we cannot blame the pandemic in that channel on our sources of income. Yes, it could have an effect on our overall retail revenue, but what we have found is that we have normalized, we have reset our costs. Our like-for-like operating expenses are now actually equal to pre-pandemic levels. So that cautious approach is now showing in our results and I think we will be able to survive additional crashes. But I think they will be lighter than in the past.

FIFI PETERS: What also stands out in your performance, Sean, is how you are containing and weathering the inflationary storm. We have heard a lot of companies talk about how difficult it is in terms of higher prices and yet it has managed to keep price pressures contained, in particular price pressures coming from the fuel sector, with the price of gasoline or Brent. crude having jumped almost 80% last year. What does this mean? Does this mean this is a lagging reaction in your numbers currently, and the effects are still going to show?

SEAN WALSH: I think there has been, on the fuel volume side, a pandemic recovery in these numbers. Although we have been very conservative in predicting next year about fuel schedules, what we are finding is a shift in consumer patterns, where your low to middle income person, who has budgeted R200 per week for their fuel, still You only have R200 per week, and now it is priced higher; so he is forced to buy fewer liters. So yeah, I think we’re going to feel that general fuel economy pressure over the next year. But luckily for us, our footprint in the fuel game is diversifying between agriculture and the general consumer. I think what is going to play into our hands is our extremely space efficient supply chain system for fuel.

FIFI PETERS: You have a guide that you will be selective in your search for investment opportunities. Do you currently have something on the table that you are reviewing?

SEAN WALSH: Fifi, yes. We have already signed a gas pipeline site for the fuel company, which will land in the first half of next year. Then we are investigating other opportunities in that space and continually, as you know, we have grown our presence in the agricultural retail space over the years, and will continue to do so.

Very interesting things are happening in the business-to-business interface with our customers. as well as the business-to-customer side on the e-commerce side.

FIFI PETERS: These exciting opportunities, are you based in South Africa or are you looking out of the country on the rest of the continent?

SEAN WALSH: Fifi, yes, I may sound too different from the others, but we believe that there are enormous opportunities to continue growing in South Africa. We believe that our market share is not yet optimal in many of the channels we serve. So my team is hell-bent on increasing market share in today’s markets, where we are executing our growth strategies.

FIFI PETERS: How much have you set aside for acquisitions?

SEAN WALSH: Fifi, about two or three years ago we spent R250 or more [million] Capex per year. We reduced it in the last year and a half to R120 or R130 million. We’ll probably lift that up a bit in the future.

You must remember that we have just concluded an agreement to sell our 21 properties in TFC or The Fuel Company, which will generate 450 million rand in the first half of next year and put us in a much lower debt position. I believe that by the end of the first half of next year our debt levels will be at 2017 levels, which puts us in a position to have solid cash flow to expand the business.

FIFI PETERS: Just in terms of the online offering of the business you referred to earlier, what are the plans to strengthen this side of the business? What kind of additional investments are you making to digitize Kaap Agri?

SEAN WALSH: It is interesting that we are following a very conservative approach to creating a virtual store over the next year. We are busy with our e-catalog at the moment, and we hope to launch, late next year, an e-commerce facility for DUAL …… 7:25 customers located, much like Takealots and other retail offerings. operators.

FIFI PETERS: Very interesting. We’ll find that pitch, Sean. But we’ll leave it there for now, sir. Sean Walsh is CEO of Kaap Agri.


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