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AGRICULTURE: Agri-business Reports Healthy Growth


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Senwes’ profit after tax for the year ended 30 April increased by 21,6% to R265 million, while a return on equity of 21,5% was achieved. Headline earnings for the period increased by 14,3% from 116,2 c/share to 132,8 c/share. The turnover of this integrated agricultural services business received a boost of 73,5% to R13 billion mainly as a result of an increase in commodity prices.

In spite of higher commodity prices, R508 million in cash was generated from operating activities, and the own capital ratio of 41% is still within the capital-maintenance guidelines of 35% - 45%. The net asset value increased from R6,80/share (April 2011) to R7,57/share (April 2012) after a dividend of 70 c/share had been paid.

Senwes has been positioned proactively in terms of volume, expertise and strategy since 2010, and the agricultural sector consequently reacted to this. As an initiator of new thinking and partnerships, Senwes tries to be at the forefront of internationalisation and diversification of its business model. Competition has increased exceptionally in a sector that is targeted by investors as a last refuge for a global economy that is actively trying to escape a lasting recession.

According to Francois Strydom, managing director, Senwes is also positioning itself strategically within the environment of greater integration between the producer and end user, combined with an inevitable increased participation in the grain value chain.

Senwes Village (‘ 160% to R169 million)
Village achieved a 160% improvement in operating result before tax of R169 million compared to the previous year’s R65 million. The division experienced a good year, with above-average sales in respect of mechanisation and input products. Favourable grain prices in the second half of the year led to higher plantings and enabled a number of producers to upgrade mechanisation equipment. This led to the second highest volume of whole-implement unit sales since 1997.

The business model with John Deere was expanded to the Western Cape through the acquisition of a 50% interest in JD Implements in Swellendam, and this is already producing higher-than-expected results.

Senwes Credit and Univision (‘ 2% to R55 million)
The demand for credit was stimulated by a 10% increase in hectares planted, as well as a 16% increase in input cost. Growth of 15% in the production book on a year-on-year basis reveals an expansion in market share, which is confirmed by the number of producers served and the hectares financed. The credit book is basically sound and the total arrears of summer grain production at 30 April 2012 amounted to 3,8%.

Univision Financial Services reported a 15% growth in turnover for the 2012 financial year. Univision’s net operating profit after interest showed a 4,7% increase since 2011.

Senwes Grainlink (‘ 27% to R183 million)
The high stock levels of 2011 caused price levels to trade below export parity. South African maize was purchased by the international market and 2,4 million tons of maize were consequently exported during the marketing year. A considerable quantity of grain was handled, but because of the above, 43,5% less grain was stored, which resulted in pressure on storage income. The market also provided few opportunities for selling grain in future months, and Grainlink had to adjust its model accordingly. The joint venture with Bunge was approved by the Competition Commission and was brought into operation from 1 October 2011. Senwes participated in white maize exports as well as in wheat and maize imports during 2012.

Local production is under pressure due to the exceptionally low rainfall in the second half of the summer season. Low opening stock levels, low soil moisture transferred from the previous season and an average crop are expected to result in lower grain stock levels, which predicts another difficult storage year.

Commodity prices are currently at relatively good levels and will probably stimulate production. Consumers globally are expected to remain affected by tight economic conditions, and commodity stock levels will recover due to higher production and lower consumption.

Considerable corporate action is expected to occur in the coming months, which will probably change the landscape and dynamics of the agricultural services sector.

The Board declared a final dividend of 15 c/share for the year ended 30 April 2012, subject to ratification by shareholders.

• An increase in turnover of 73,5% to R13 billion
• Return on equity of 21,5%
• Net asset value grew by 77 c/share after dividends of 70 c/share had been paid
• Growth of 20,6% in EPS, from 121 c/share to 146 c/share
• This represents profit of R265 million after tax, compared to R219 million in the previous year
• Dividend returns of 6,3% on an average share price of R9,60/share


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