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Home » Industry News » Agriculture » Low hanging fruit at Capespan?

Low hanging fruit at Capespan?

AGRI-BUSINESS investor Zeder looks determined to own 100% of Bellville-based fruit exporting Capespan. Zeder has made an awfully generous offer to the 25% shareholding in Capespan that is in the hands of minority shareholders – arguably underlining an unshakeable belief in the future promise of a business that has always not delivered consistently on profits over the years. The question then is what Zeder – which is renowned for making astute agri-business investments – is really seeing in Capespan?

The company’s fruit division – the biggest segment by revenue – saw total volumes hampered by lower production yields from the southern hemisphere as well as the negative impact of Citrus Black Spot on citrus volumes from South Africa. Capespan MD Johann Dique said total fruit volumes in the year to end December decreased by 11% when compared to the prior year. But he noted that similar pricing in original currencies were experienced, which meant revenue increased marginally due to the weakening of the Rand.

Although the overall performance of the division was 26% down on the previous year, there were some bright spots. Dique said operating results from Golden Wing Mau in China exceeded expectations due to the continued expansion and growth in the local and import markets. He said excellent results were also reported by Capespan UK and Capespan Egypt as well Metspan and Capespan North America. Dique said the poor performance in overall operating results came from a decline in Europe and margins that remained under pressure in Japan due to the continued depreciation of the Yen. Capespan South Africa showed a loss for the year.

But the fruit division is by no means on the backfoot. Significantly Golden Wing Mau expanded its footprint with the creation of a joint venture company branded as May Fresh, as well as the acquisition of a 25.1% shareholding in Good View based in Hong Kong.

In addition, the restructuring of fruit logistics in South Africa saw Capespan acquiring a controlling stake in Aspen Logistics – which has subsequently been rebranded as Contour Logistics. Dique said all fruit logistics of Capespan South Africa will in future be handled by Contour Logistics. 

“This was, however, still work in progress at year-end and will be fully stabilised in the new year.”

What might be really appealing to Zeder is that Capespan’s fledgling farming operation is starting to show great potential. Dique reported that both yield and quality in grape production increased in financial 2014 and resulted in substantially improved results. But he cautioned that most of the improvement was neutralised by very low market realisations in the European markets over the December 2014 and early 2015 marketing activities.

He said production yields on pome fruit and citrus were down on the previous year, but that efficiencies on all farming operations have improved. The recurring operating results from farming operations overall showed a most encouraging 53% improvement on the previous year despite what Dique described as “the severe challenges in market realisations of table grapes.”

Dique revealed that expansion and renewal of farming operations continued during the year with over R96m being spent on new and replacement of existing vineyards and orchards, upgrading of packhouses as well as the replacement of vehicles and machinery.

CBN’s guess is that Zeder is probably most enamoured with Capespan’s promising logistics operations. Dique reported that the strategy of handling general cargo all year round at the FPT division had resulted in good growth during the financial year. But he said this growth was tempered by the decline in the volume of fruit pallets handled.

Although the softer fruit volumes meant a decline in revenue, Dique disclosed that gross profit improved by 7.2% as a result of efficiency improvements made possible by the implementation of new systems and operating procedures at FPT terminals. He singled out the Cape Town terminal as producing a “very good turnaround,” delivering a profit “that was long overdue.”

Overall the Logistics division performed commendably, delivering an increase in recurring operating results of 24% over the previous year. Looking ahead, Dique stressed that the strategy of transforming general cargo continued during the year with the upgrading of cold-stores at FPT as well as the converting of warehousing into open areas to improve access.

Perhaps it’s already possible to discern the adventurous Zeder’s influence at Capespan with the company unveiling a flurry of acquisitions. These include buying coldstores, packhouse and equipment from Novo Packhouse; business operations, moveable equipment, farm land and biological assets (pome fruit farm) from Theewaterskloof (Pty) Ltd.; and a 25% stake in Fruchtimport vanWylick GmbH in Germany.

One has to wonder where a Zeder intends taking the promising Capespan business in the next five years? In this regard it should be remembered that Brian Joffe’s massive services conglomerate Bidvest and Irish fruit and vegetable giant Total Produce both built positions of influence at the company before being edged out by Zeder.

Officially, Dique reiterates that management remains committed to “build upon a valuable foundation and ensure that it remains a respected organisation in the global fruit industry.”

He maintained that changes that have been implemented are all aimed at ensuring Capespan can continue to deliver on a sustainable value proposition to both leading producers and customers around the world. He specifically cited a global acquisitive growth strategy to deliver wider and deeper market penetration, service delivery and procurement footprint, the expansion of primary production of grapes and pome fruit and the expansion of capacity to improve and expand on fruit logistics and general cargo at certain key areas of the Logistics Division.

Clearly a very busy – and hopefully fruitful – period lies ahead.


By Jenni McCann 

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