| Thu 3 Jul 2003, 13:00 | | Afgri closing in on earnings growth target |
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Afgri closing in on earnings growth target
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Group shrugs off retail slowdown
AGRICULTURAL services company Afgri said yesterday it was set to achieve its earnings growth target of 15% to 20% this year, despite a possible slowdown in its retail business as a result of weaker grain prices this year.
Afgri reported a 38% jump in revenue to R6,1bn in the financial year to February, with profits rising 14% to R368m.
The Afgri requisites division, which includes the retail outlets selling farming equipment, had phenomenal growth last year, due largely to soaring grain prices putting more cash into farmers' pockets.
However, maize prices fell more than half this year from last year's peak of about R2000 a ton.
Anton Visagie, head of Afgri Requisites, said retail sales fell 10% in the first quarter, but was likely to recover in the third quarter, traditionally the busiest period for retail business.
"Margins over the next six months are likely to pick up and we are expecting it to be roughly the same as last year," he said.
Afgri outlined a set of strategies at various levels of its business to diversify it from its core grain handling activities. Visagie said Afgri Requisites aimed to grow the number of Farm City retail stores, which supply nonagricultural requisites to smallholders, to more than 10 stores in three to four years after the success of its first store near Pretoria.
The division is also finalising a joint venture agreement with property group Pam Golding to sell rural agricultural land.
"The business model is a lot more robust. Despite the decline in the retail business, we are heading for 15%-20% growth in line with the target set three years ago," said Afgri's MD Jeff Wright.
The Afgri Products division, which makes up more than half of Afgri's business, outlined plans to tap a lucrative market dominated by seed manufacturers such as Monsanto and Pannar. Afgri has a long-standing agreement with Monsanto to supply seed to grain farmers.
Louis Wolthers, head of the Afgri Products division which incorporates the seed business, said a new agreement would not be entered into with Monsanto when the contract expired soon.
Afgri has employed expert geneticists to develop its hybridseed breeding programme.
Wolthers said the company's client base would give it unique access and marketing opportunities to break into seed development. "We have a unique position in that we have access to the whole value chain." It had to create its own seed development business to expand in Africa.
Afgri also said it wanted to dispose of its 50% stake in broiler business Early Bird, held jointly with Astral Foods. Afgri Services head John Mooney said the company had been looking for a long time to quit the broiler business. Astral Foods owned County Fair, a big competitor to Early Bird.
"It is not an easy relationship where your partner is also your competitor. We need to resolve an exit strategy, but at the right price. We have indicated that we would buy (Astral Food's) share at the right price too," said Mooney.
Last year's R67m grain-trading division loss, due to reckless trading of maize futures by some of its traders, prompted the company to appoint three executives to improve risk control in this division.
Jul 03 2003 07:59:49:000AM Nasreen Seria Business Day 1st Edition
Thursday
03 July 2003
