Neels Blom
17 September 2008
Johannesburg — THE global rise in agricultural commodity prices is not yet reflected in Afgri's financial results in which the listed agribusiness reported an 18,7% increase in headline earnings to 73,7c per share for the 16-months to June this year.
Higher grain prices and a big maize crop of about 12-million tons created a favourable agribusiness environment, but it was offset by sharp rises in input costs such as fuel, chemicals and fertiliser that are likely to pressure farmers' margins.
Afgri's main businesses, grains storage and handling and retail and financial services, almost exclusively serve farmers. The group reported revenue of R10,6bn yesterday from R6,3bn for the year to February last year, though the periods are not strictly comparable. Operating profit for the reporting period was just more than R1bn against R681m previously.
Financial year-end was changed to June to reflect the growing season better, acting CEO John Mooney said yesterday. Sales for the four months February to June came to R2,8bn on R2,1bn cost of sales.
Mooney said a better season and focus on internal efficiencies set the scene for improved results in all the businesses except Daybreak Farms and Afgri Seed. The season ahead would be "make or break for the seed business".
The group reported a sharp rise in sales of primary inputs while retail and equipment businesses benefited from store rationalisation, improved procurement and stock management policies and increased buying from farmers in anticipation of higher maize prices.
Afgri Logistics Services turnover rose 17,2 % to R273m from R233m for the 12 months to February last year, though pretax headline profit fell a third to R72m (from R113m) on the low carry-over effect of the previous two poor maize crops.
Afgri's handling and storage services to the grain industry represents nearly a third of the country's total silo capacity of 14-million tons.
There were important developments, chief of which was diversifying group funding requirements for its financial services business from a 100% exposure to the Land Bank to foreign funding, among other sources. Losses from discontinued operations came to R58m.
Afgri abandoned its emerging farmers' operation. New chief financial officer Jan van der Schyff said management accepted that lack of "hands-on" management of the project had led to its failure. A forensic investigation was under way to determine the cause of failure.
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