STELLENBOSCH-based agribusiness investor Zeder looks set to aggressively grow its seed specialist Zaad – despite a marked fall in profitability in its interim results.
Zaad was formed several years ago when Zeder nudged Cape Town-based Agricol into a merger with Oudtshoorn-based Klein Karoo Seed Marketing. Zeder holds around 93% of the enlarged seed business. The company develops and distributes a range of agricultural crop seeds in South Africa, Africa and the rest of the world. It is one of the smallest components of Zeder – which also has investments in Pioneer Foods, Capespan and Kaap Agri – but the profit potential has become more apparent over recent years.
Between the 2014 and 2016 financial years (all to end February) Zaad managed to grow turnover from R465m to over R1.2bn, and push earnings up from R51m to R105m. In the half year to end August Zaad, however, showed an overall recurring headline loss of R7m (from a previous profit of R21m.) Turnover was up almost 10% to R510m, but margins were squeezed to just 3.3% (from almost 11% previously) to leave gross profits down 52% at R17m.
But not too much store should be put in the first half of trading in the financial year to end February 2017 as Zeed traditionally enjoys a stronger second half. Zeder does caution that the first half results reflect the bulk of the annual input cost cycle, and points out that related revenues are normally recorded in the second half. It pointed out that the like-for-like profit comparison was not representative as Zaad actually delivered ahead of budget – adding that the revenue growth was encouraging in light of El Niño conditions that have induced drought over many agricultural areas in South Africa and Africa.
Zeder also reported positive contributions from Africa and international new markets for Zaad’s Gebroeders Bakker offshore venture. The company saw substantial growth opportunities – but Zeder CEO Norman Celliers warned that political and climatic risks needed to be considered at all times. Celliers, however, reiterated that growth at Zaad was underway.
“With a strong product portfolio, proprietary intellectual property (IP) and established South African and international market presence, growth is underway.”
By Jenni McCann