TWK Investments, a diversified agriculture and forestry company, said basic headline earnings per share fell 37.25% to 549.54 cents for the year to August 31 after sales were hurt by volatile exchange rates, falling commodity prices and cancelled wood chips sales.
CEO André Myburgh said, however, the new summer production year was starting favourably for the primary producers, with much lower input costs, although commodity prices were also much lower than last year.
“The most significant danger for the new year lies in the higher interest rates and the production conditions for the season. It is crucial to highlight that an El Niño is forecast in the upcoming 2023/24 summer season and is an aspect to watch. However, we remain optimistic that it will have a mild impact on TWK’s geographical footprint and thus keep production at decent levels,” Myburgh said.
He said the overall agriculture outlook was stable to positive for TWK’s operations.
“Our balance sheet is strong, and we are investing and innovating to improve our portfolio’s value and future focus systematically and to optimise the many growth opportunities.The outlook remained… underpinned by the group’s diversified business model,” he said.
He said TWK was disposing of its motor dealerships and as at August 31, this segment had been classified as “discontinued operations” and “assets-held-for-sale”.
Revenue from continued operations increased 4.56% to R9.65 billion primarily due to strong growth in the timber segment, mainly from wood chip export growth and local timber sales. The financial services and the grain segments made positive contributions.
The performance of the retail and mechanisation segment came under “severe pressure” mainly due to the financial performances of Constantia Fertilisers.
The main factors behind a decrease in profit were continuous declines in fertiliser product prices and sales volumes, as well as product price inflation.
Earnings before interest tax depreciation and amortisation (Ebitda) from continuing operations fell 7.14% to R620.98 million, with the decline mainly a result of the performance of the retail and mechanisation segment.
The timber segment increased revenue 35.80% to R2.96bn. During the year 684 711 tons was exported from TWK’s facility compared to 634 664 tons the previous year, representing a 7.9% increase.
The improvement was mainly the result of the demand from pulp manufacturers in Japan. The depreciation of the rand supported wood chip export margins.
Ebitda for the timber segment increased by 9.82% to R388,73m, however the Ebitda margin decreased from 16.25% to 13.14%.
Revenue for the retail and mechanisation segment fell 8.29% to R4.64bn. The segment’s Ebitda decreased by 78.87% to R48m.
Fertiliser product sales, the largest sales contributor for TWK Retail, were hurt by volatile local and global fertiliser conditions, which resulted in severe margin pressure on the business.
Constantia Fertiliser encountered supply chain challenges and high volatility in nitrogen, phosphate, and potassium prices. The volatile rand/dollar exchange rate also contributed to a more complex fertiliser planning environment to enable the business to source raw materials at reasonable prices.
Fertiliser sales for the year to August 31 fell by 10.74% to 186 501 tons. Lower sales volumes were attributed mainly to farmers postponing the purchase of fertiliser products due to high selling prices, lower fertiliser application rates throughout the year and planted crops using less fertiliser in the second half of the year.
Mechanisation sales, through the New Holland agencies, decreased by 5.85% to 209 units primarily as a result of the decline in sales in the Pietermaritzburg area. This was attributed to financial problems experienced by sugar cane farmers and the availability constraints of imported high-kilowatt equipment from New Holland, a result of global logistics challenges and higher interest rates and price inflation which put farmers under pressure.
The group’s cash generated from operations after working capital increased by 81.81% to R673.14m. A dividend per share of 115 (150) cents was declared.
BUSINESS REPORT