Agricultural investment group Zeder reported disappointing but not unexpected results for the six months to August given the challenging macro-conditions in the broader SA market.
Pioneer, which accounts for 52.3% of Zeder’s portfolio reported weak results for the half-year to March. These have worsened since. A recent trading update warned that Pioneer’s revenue had decreased by 4% for the ten months ended July 31 2017, compared to a 2% increase reported for the six months ended March 31. This can mainly be attributed to price deflation in maize.
In addition portfolio companies Capespan, Zaad and Agrivision reported declines in revenue and earnings.
The improved maize price however benefitted poultry business Quantum, which along with agricultural retailer Kaap Agri, reported growth in turnover and earnings.
Zeder’s sum of the parts value fell 9.5% to R7.17/share from R8.53 during the reporting period.
Recurring headline earnings, which provide a more realistic way of evaluating Zeder’s performance (than headline earnings), fell 74.5% to 3.8c share.
“Our numbers are behind our projections and are disappointing,” says Zeder CEO Norman Celliers. “That said, most portfolio companies delivered against operational targets and should improve or recover during the next reporting cycle.”
This is the first interim period in which Zeder did not have to pay a management fee to PSG. (In the same period last year Zeder paid R75 million to its holding company.)
That’s because in 2016 PSG management forfeited its rights to management fees in exchange for an additional 12% equity interest in Zeder.
Thus Zeder has used its stronger balance sheet to invest through the cycle for the long term. Borrowings and interest repayments have increased as the company has invested further into Zaad and other portfolio companies.