Silos save the day for Afgri

Bumper maize crops and an improved farming environment in Afgri’s major operating areas of Mpumalanga, North West and Free State resulted in record receipts into the group’s silos, and boosted its interim financial results for the six months ended December 2008.
Total sales from continuing operations increased 18,5% to R4,95 million, compared to R4,18 million in 2007, resulting in a profit before tax of R322 million. This was a 64,3% increase over 2007’s R196 million. But growth in after tax profits was tempered by losses from discontinued operations. After considering losses, profit still grew by 16,5% for the period.
Afgri’s seed business reported a R58 million loss and the company is in the process of disposing of it. Afgri expects to recoup only a small portion of the loss and confirmed that retrenchments would only affect a limited number of individuals.
Added to losses incurred by the seed division and impairments, losses from four other operations discontinued in previous years had a combined pre-tax discontinued loss of R21 million. The operations were farming, snacks, Citrifruit and cotton. The closure of all these operations represents close to a R70 million write-off after tax.
Chris Venter, Afgri’s recently appointed CEO, said the discontinued operations were part of a strategy to remove non-performing and non-core business units to streamline the business and ensure capital was correctly applied to all its areas.
Afgri Financial Services, comprising the lending and brokering operating units, grew by 7,1% over the previous period, restricted by the global banking crisis and focused credit management.
Revenue for Agri Services, which comprises Logistic Services and Producer Services, increased by an impressive 77% on the back of a large maize crop. Operating profit margins within the Logistic Services segment increased to 37%.
The Producer Services unit, consisting of the group’s retail operations like the John Deere agency, and the sale of direct farming inputs, showed a revenue growth of 13,2%. This is primarily due to a good crop and increased market share of farming mechanisation equipment to 44%. Commodity price increases helped push this segment’s operating margin to 5,3%, up from 3,3% in 2007.
Poultry and animal oils, part of Afgri Foods, performed above expectations, but lower than the previous year, due to an oversupply of poultry in the market resulting in margin pressure.
Venter said a further deterioration in the economy could impact on the foods division, although the expected good maize harvest would stimulate the sector.
Afgri also announced a securitisation of its debtors book to the value of R2,5 billion, underwritten by Rabo Bank. Venter said this was an extremely positive move as Afgri was now positioned to offer agricultural finance covering a wide spectrum to its farmers. – Staff reporter