Dry and hard. Picture: REUTERS
Dry and hard. Picture: REUTERS

Diversified agriculture group Kaap Agri says rising fuel costs, drought conditions and policy uncertainty continue to prompt caution in the agriculture sector in SA, and the company is focusing on its clients and simplifying its business processes.

The company, which trades in the agricultural, fuel and related retail markets in Southern Africa, said revenue rose 29.1% to R8.45bn in its year to end-September, partially due to the acquisition of a KwaZulu-Natal-based building-supply company in October 2018.

Kaap Agri said on Thursday it was continuing to consider further acquisitions, amid a subdued retail environment and caution in the agricultural community due to “erratic” climatic conditions.

“Our ongoing diversification strategy and resilience continue to yield strong revenue growth, paving the way for further profitability as some of the revenue growth is still to flow through to the bottom line,” Kaap Agri CEO Sean Walsh said.  

He said the diversification strategy had lessened the effects of tough market conditions, with revenue growth contributions from its different businesses.  

“However, the business environment in which we operate remains constrained, with expectations of ongoing pressure in the short-term. Overall, we believe Kaap Agri is suitably positioned to take advantage of an improvement in trading conditions and to execute in terms of our strategic imperatives. Our view is to continue doing more business in more places, with more customers and with more products,” Walsh said.

Headline earnings per share rose 14% to 397.85c, with the company raising its total dividend 5.8% to 123.50c.

Agricultural conditions in the Western Cape had largely improved during the year, though certain areas were still experiencing drought.

Low rainfall in the latter parts of the wheat season had resulted in a decrease in the anticipated wheat harvest when compared to that of 2018, with all indications pointing to a slightly below-average yield across the total Swartland region.

Conditions in the northern parts of SA, as well as in KwaZulu-Natal, were encouraging, it said.

Kaap Agri’s share price was up 7.10% to R30.00 on Thursday, having fallen 13.09% so far in 2019.

gernetzkyk@businesslive.co.za

njobenis@businesslive.co.za