Agriculture group Kaap Agri says net profit rose 3% in the six months to end-March, as the company’s recovery from drought conditions in the Western Cape continues.

The company, which trades in the agricultural, fuel and related retail markets in Southern Africa, said half-year revenues were up 28.7% to R4.4bn, upping its dividend 4.7% to 33.50c per share.

The results were as expected, but Kaap Agri’s second half is expected to be much better, said Anthony Clark, independent analyst at Small Talk Daily Research. This is largely due to the wheat harvest being late, and the earnings benefit now expected to register in its second half, Clark said.

Kaap Agri said on Friday its recovery from the Western Cape drought has been slower than anticipated. However, the addition of the Forge business in KwaZulu-Natal, and market share gains in the inland region, “have positively impacted the trade division”.

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Net profit for the period was R161.2m, from R156.2m a year before.

Kaap Agri said the growth in revenue was mainly driven by a 21.9% increase in the number of transactions. Product inflation, excluding the impact of fuel inflation, was slightly negative.

The group’s gross profit margin was reduced to 15.5% from 17.3%, “impacted by increased turnover of low-margin agri-products, fuel price increases, and general retail margin pressure”, it said.

“The second half of the year will remain challenging and improved performance will be dependent on normalised weather patterns and increased consumer confidence,” the company said.

“Our footprint expansion continues, as will our investment in our people and in selective revenue and cash-generating expansion and acquisition opportunities aligned with our strategic plans.” 

At 1.45pm, Kaap Agri's share price was up 3.68% to R33.