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Strong numbers from TWK

The filling station division is a dark spot; but mechanisation, crops, fertilisers and the new renewable energy segment are all doing well: TWK Agri CEO Eddie Fivaz.

SIMON BROWN: I’m chatting now with Eddie Fivaz, the CEO of TWK [Agri]. [Annual] results out late yesterday afternoon: revenue from continued operations up 15.3%, headline earnings up 25.8%, and the dividend up 75% at R1.14. That was for the year ending August.

Eddie, I appreciate the early morning time. A really strong set of numbers coming out of TWK. The one maybe dark spot was the filling-station division. Let’s quickly touch on that. What are your challenges that you’re seeing there?

EDDIE FIVAZ: Good morning, Simon and your listeners. The fuel industry is a bit of a nightmare for us at the moment, really still driven by the impact of Covid. People are not moving around, not going to work and all the travel issues. So, yeah, it’s still a problem, but not part of our core businesses. We decided to sell some of those operations and see if we can’t let that improve our profits further and unlock that cash that’s currently sitting there.

SIMON BROWN: I take your point. I’m still out and about a bit, but I’m probably using about a third as much petrol as I used to.

Your retail mechanisation segment, which is now [worth] about R3.3 billion, is a really big segment [in] a really strong period. I was having a look and I have to say I hadn’t realised quite how many stores you have dotted around. There are about 30 of them, which certainly have been producing very strong results.

EDDIE FIVAZ: Yes, absolutely. I think that’s really driven by a strong agri sector at the moment. We saw good yields from maize and the crops from the farmers, which also benefited from the good commodity prices. So the farmers are optimistic and it’s really evident in the double-digit increase in tractor sales that we saw in the last couple of years. The fertiliser sales from TWK’s side were up 23%. So, with the good spread of our stores out in Mpumalanga and Natal, we are really able to benefit from that growth.

SIMON BROWN: I chatted with Wandile Sihlobo, the agri economist a while ago. He was saying that we should have another good planting season. It looks like we’re getting good rain, and importantly prices are remaining elevated. Are you optimistic for the current financial year?

Listen/Read transcript: Concerns continue over rising agricultural input costs

EDDIE FIVAZ: Yes, we are. We are definitely optimistic. Like I said, [with] the increase in sales we are already seeing it in the new financial year. I’m very optimistic, and we are positive about the new year as well.

SIMON BROWN: You’ve always had some timber and you made the acquisition of the Peak Timbers business as well during the year. Who is your market for the timber business?

EDDIE FIVAZ: The timber and forestry industry is one of the more consistent and better-performing commodities in the agri sector, and we really see significant growth there and also the opportunity that will come with it. There is currently bigger demand for our wood chip exports into the market, and we will also benefit from the weaker rand out of that. So the timing of that acquisition was really spot-on, and we will now be able to deliver to our markets [given the] increased demand for the products, like I said.

With our knowledge in terms of the timber industry, with good forestry practices, and with a bit of cost savings that we can get out of Peak [Timbers] we see a good opportunity and even better results going forward.

SIMON BROWN: You’ve got your renewable energy segment. It is at this point still very small, with revenue of R3.4 million, Ebitda of R670 000-odd. I’m imagining this is something which you’re starting small, but which potentially has significant upside. I’m thinking particularly of farmers who have pressure from Eskom, both in terms of reliability and in terms of cost.

EDDIE FIVAZ: It’s actually a very interesting model where we lease roof spaces from malls, and then put on the solar panels and sell the electricity to the users. So, like you said, it’s a new venture. We see a lot of potential there, especially with what we see now with the increase in electricity [prices] and also the demand side that’s problematic. It’s still new and still small. Yes, we are positive about it –let’s see how it goes. We also have plans to increase it if it [gives] the returns we expect.

SIMON BROWN: Very, very tiny at this point, but something that could become could become quite meaningful in time.

We’ll leave it there. That’s the CFO of TWK, Eddie Fivaz. I appreciate the early morning time.

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