KAL Group expects improved second half

Agriculture, fuel and manufacturing company KAL Group, formerly Kaap Agri, has reported a 4.6% decline in first-half headline earnings but expects a “significantly improved performance” in the second half.

Headline earnings for the six months to end-March declined to R309.9m from R324.8m, while headline earnings per share (HEPS) decreased 4% to 392.47c.

Revenue declined to R10.8bn from R12.05bn a year ago. Revenue came under pressure during the first half, largely due to the high contribution (57.6%) of fuel revenue to total revenue and reduced grain handling income, the group said on Thursday.

Fuel prices reduced by an average 12.4% compared with a year ago. Both retail and agri-input channel revenue increased.

Nevertheless, the group declared an interim dividend of 56c per share, up 3.7% from a year ago.

Revenue from the Agrimark business segment, which includes the Agrimark retail branches, Agrimark fuel filling stations, Agrimark Packaging distribution centres, New Holland agency services and fuel redistribution units, increased by 2.8% year on year and profit before tax was up 2.4%.

The group said the SA operating environment remained challenging and, despite some positive sentiment during late 2024, recent developments, specifically the uncertainty around the government of national unity (GNU) and the US trade war, had had a negative effect on a number of key economic indicators. However, the group said the impact of these developments was not yet fully reflected in the current indicators.

According to the Bureau for Food and Agricultural Policy, of the 4.6-million tonnes (R97.9bn) of fruit, nuts and wine exported during 2024, only 3% (5% of value) was exported to the US. Though the overall impact of tariffs on these sectors would be limited, more significant effects exist in specific areas, KAL Group said.

“The impact on KAL will result from pushback on SA export prices, affecting farm-level profitability negatively. Given our product and geographical diversification, the impact on KAL is expected to be limited to stone fruit and wine (Western Cape only) and table grapes, dried fruit and citrus (Western Cape and Northern Cape),” the group said.

In addition, the effect of the Russia-Ukraine conflict and Israel-Palestine hostilities was expected to continue to drive market volatility.

Most agri sectors in which the group participated had experienced a better year and the production outlook remained positive. Dam water levels throughout the regions in which it operated were healthy, it said.

“Given the disappointing earnings during the second six months of the prior year, the occurrence of Easter in April, the onboarding of new fuel site acquisitions in the upcoming months, and considering the upward performance trend experienced during [the first half], management expects a significantly improved performance in [the second half],” it said.

mackenziej@arena.africa