ZEDER’S investment portfolio was resilient in the six months to August 31 after improved agricultural conditions paved the way for most of its investment companies to report acceptable earnings growth.
As an investor in agribusiness and related industries, with a focus on the food and beverage sectors, its investment portfolio was valued at R6.1 billion on August 31, an increase of 7 percent from February 28, 2021, mainly due to increased valuations of The Logistics Group (TLG) and Kaap Agri.
Zeder’s share price increased 3.16 percent to R3.26 yesterday morning following the release of the interim results.
The group sum-of-the-parts (SOTP) value per share, its benchmark measurement calculated using the quoted market prices for all JSE-listed investments and valuations performed for unlisted investments, increased to R4.45 as at August 31, from R4.33 as at February 28, 2021 and from R3.72 as at August 31, 2020.
Chief executive Johann le Roux said portfolio companies had performed “exceptionally well” during the period.
“Our portfolio companies appear to be better positioned than most companies with regard to the Covid-19 risks. It, however, remains difficult to predict the business environment that will unfold in the short to medium term,” he said in a statement.
“Our immediate focus will therefore remain on ensuring that our existing companies position themselves competitively, maintain market shares and conserve balance sheets while continuously driving operational and cash generation improvements,” he said.
Zeder’s interim reporting period traditionally represents the lesser half of the portfolio’s annual earnings. Year-on-year comparisons at a portfolio company level at the interim stage of reporting may, therefore, reflect seasonal variances.
Zaad, a strategic holding company in the specialised agri-inputs industry with a focus on emerging markets, especially Africa, the Middle East and Eastern Europe, recently changed its year-end from January to June, to align the financial reporting requirements to fall outside the key summer crop cycle. As a result, for its year ended June 30, 2021, Zaad reported recurring headline earnings of R177 million.
The specialised agri-inputs market, and particularly hybrid seeds, remained attractive, said Le Roux.
TLG has been positioned to continue operating its existing logistical and terminal assets in South Africa and expand its service offering and capabilities to a broader customer and market base in southern Africa.
TLG reported recurring headline earnings of R90m for the six months, an increase of 186 percent from the prior comparative period, due to the strong commodity cycle and resultant higher volumes on the export mining commodity side of the business. The citrus industry experienced record volumes and this contributed to growth in the higher-margin fresh fruit export segment.
Capespan reported a R56m loss, compared with the prior comparative period loss of R27m, with the higher losses largely due to timing differences on the farming operations and decisions taken during the initial stages of the Covid-19 pandemic during 2020.
Le Roux said promising agricultural conditions boded well for the upcoming grape season, and Capespan management had been proactive in planning for any potential disruptions as a result of supply chain constraints.
Kaap Agri, with its mainly retail characteristics, augmented by a dedicated retail fuel strategy, lifted recurring headline earnings a share by 23 percent for the six-month period to March 31, 2021.
Le Roux said the disposal of the investments in Pioneer Foods and Quantum Foods, and the declaration of special dividends during the past 18 months, resulted in a material change to the size and composition of the Zeder group. This had necessitated the Zeder board to reconsider the company’s future strategy.
During this process, Zeder also received third party approaches on various portfolio investments, and these approaches were being evaluated.
“The positive climatic environment and demand for commodities should contribute to improved trading conditions in the medium term and Zeder’s portfolio companies are well positioned to benefit from same. This, with the healthy cash reserves on hand and focus on additional value unlock options, should allow us to deliver attractive returns,” Le Roux said.