Agriculture group Senwes reports 30.9% increase in profit

CEO Francois Strydom reflects on good results and current conditions in SA agriculture, the sector that feeds us and employs many.

FIFI PETERS: We are finishing off the show with results coming out of agribusiness Senwes. It is listed on one of the alternative exchanges in South Africa, the ZAR X, and came out with pretty good numbers earlier on today. Profits are higher, helped by a strong jump in revenue.

For a closer look at what is happening in agriculture, the sector that feeds us all and of course employs a whole lot of farmers, I’m joined by Francois Strydom, the CEO of Senwes. Francois, thanks so much for your time. It does look like it’s been a really good year for you. Just take us to what on the ground has driven your strong revenue and profits this time around.

FRANCOIS STRYDOM: Thank you very much. Yes, an exceptionally good agricultural production year, both in the summer and winter rainfall areas. That’s the one big factor.

The other one is almost a super cycle in commodity prices. Of course the Ukraine/Russia incident pushed those, both the hard commodity and soft commodity prices, up. But internally [as] the company we’ve been working in the group for the past 12 years on a strategy, and that has really come together very, very well. So good mergers and acquisitions in the recent past, reorganisation of our business model, and our balance sheet was very well deployed. So yes, a very well-constructed and clean operational result this year, which we are very thankful for.

FIFI PETERS: Most of us can relate to the super cycle in the commodities market. We’ve seen it, we’re feeling it in our pockets. We’re feeling it in terms of the pay that we take home and what we have to pay for food. I’m wondering, just based on what you are seeing on the ground, how long do you think these elevated food prices – the maize, the wheat, the soybeans and all of that, notwithstanding the fact we have seen a pull-back in recent weeks – how long do you expect things to be this way?

FRANCOIS STRYDOM: You are absolutely right. Both hard and soft commodities have pulled back considerably from their high levels and are still on their way down. We see crude [oil] dip below $100/barrel, and most of the commodities have moved down 20% to 30%. I think there was an overreaction in the first place.

In the second place, the Ukraine/Russia incident is almost sort of normalised and people are rearranging and reorganising themselves. We’ve had a very good harvest in South Africa – that certainly also reacts to that. I think there are signs worldwide of a slower economy; even worse is suspected food inflation rising, interest rates rising. The consumer can just not afford it any more. So my expectation is that it will normalise even further.

But what shields us as South Africans from even lower levels is the weakening rand. Of course that has an effect the other way. That you can also expect at some point; when politically we start getting our act together it might also normalise.

FIFI PETERS: Do you mean because of import inflation and the fact that it will be more expensive to bring in some goods?

FRANCOIS STRYDOM: Yes, definitely. The shipping charges were over-inflated, and I think that will start normalising as the world comes out maybe a little bit worse at first, but as we move through this sort of recession phase I think we’re at that low point where things might start changing for the better.

FIFI PETERS: For the better for your profits? What does the pull-back in these commodity prices mean for profits in future? What does it mean for your plans going forward?

FRANCOIS STRYDOM: Our business is based on volumes and not on the commodity price itself. So we are a storer of the commodity, we sell inputs to the farmer, so the farmers’ profitability, of course, has been very good in the recent past. That certainly comes under threat now.

But our profits are based on volumes as long as there are good volume flows through the different value chains – and of course we are an acquisitive company. We’ve just done a deal in Europe, in Germany, where we bought three different John Deere agencies.

So we are expanding and, on the back of that, and of course being more efficient, our prospects are that the company will keep on producing healthy profits

FIFI PETERS: And load shedding? Is this a problem for your business?

FRANCOIS STRYDOM: Absolutely, the whole value chain. This is absolutely disastrous for every business – from the small business entrepreneur to the farmer. It wreaks havoc. It is a tremendous problem that we are having. We see it continuing for at least the next 10 years, this cycle, before Eskom normalises, hopefully. But South Africans are wonderful business people. They find ways around it; alternative energy is exploding. We have invested millions of rands in alternative energy and we find ways eventually around it.

FIFI PETERS: We’re certainly resilient as South Africans. We know how to make plans – plan Bs, plan Cs, plan Ds.

Francois, thanks so much for your time. We’ll leave it there. Francois Strydom is the CEO of Senwes.

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