Capespan Buys The Farm

PLANS by Bellville-based fruit marketing giant Capespan to secure product from its own production sources are taking shape nicely.

Capespan owns a number of fruit farms and farm management contracts operating under the Capespan Farms umbrella in SA and Namibia. Officially, the farming strategy is “to enhance the procurement effort with sought after cultivars for leading retailers”.

The farming operations include Oraculim, Chris Ida Boerdery, Altius Trading, Infracorp and Rapiprop as well as 75% controlled Capespan Namibia and 49% owned Mogolobotho.

In 2011 Capespan farms seemed fraught with problems when directors reported increased losses due to “unresolved inefficiencies” and severe weather occurrences. It was during this time that Capespan took the brave step of buying out the remaining shareholding in Western Cape based farming company Rapiprop.

In the interim period ending June 2012 the farming operations offered a hint of their future potential.

While costs in the farming division shot up 25% due to the increases in variable costs associated with the increased volumes produced, the division managed a very encouraging operating profit of R12.5m. The bottom line loss (after finance costs) was reduced markedly to R4.4m compared with a R14m loss racked up in the corresponding interim period in 2011.

But what really backs up Capespan’s decision to press on with farming endeavours is the 34% hike in revenue by the farming division to R170m.

That means the fledgling division is already accounting for 6.5% of Capespan’s turnover, and can be considered an integral part of the company’s new customer focussed global fruit procurement strategy. The big question is whether Capespan – currently trading under a cautionary announcement – has an appetite for more farming ventures in SA. Or will it extend this strategy abroad?