FIFI PETERS: We are ending off the present with outcomes popping out of agribusiness Senwes. It is listed on one of many different exchanges in South Africa, the ZAR X, and got here out with fairly good numbers earlier on at the moment. Profits are greater, helped by a robust bounce in income.
For a better take a look at what is going on in agriculture, the sector that feeds us all and naturally employs a complete lot of farmers, I’m joined by Francois Strydom, the CEO of Senwes. Francois, thanks a lot in your time. It does appear like it’s been a extremely good 12 months for you. Just take us to what on the bottom has pushed your robust income and earnings this time round.
FRANCOIS STRYDOM: Thank you very a lot. Yes, an exceptionally good agricultural manufacturing 12 months, each in the summer season and winter rainfall areas. That’s the one massive issue.
The different one is nearly an excellent cycle in commodity costs. Of course the Ukraine/Russia incident pushed these, each the arduous commodity and mushy commodity costs, up. But internally [as] the corporate we’ve been working in the group for the previous 12 years on a method, and that has actually come collectively very, very nicely. So good mergers and acquisitions in the current previous, reorganisation of our enterprise mannequin, and our stability sheet was very nicely deployed. So sure, a really well-constructed and clear operational outcome this 12 months, which we’re very grateful for.
FIFI PETERS: Most of us can relate to the tremendous cycle in the commodities market. We’ve seen it, we’re feeling it in our pockets. We’re feeling it in phrases of the pay that we take house and what we’ve got to pay for meals. I’m questioning, simply primarily based on what you’re seeing on the bottom, how lengthy do you suppose these elevated meals costs – the maize, the wheat, the soybeans and all of that, however the very fact we’ve got seen a pull-back in current weeks – how lengthy do you anticipate issues to be this fashion?
FRANCOIS STRYDOM: You are completely proper. Both arduous and mushy commodities have pulled again significantly from their excessive ranges and are nonetheless on their method down. We see crude [oil] dip under $100/barrel, and a lot of the commodities have moved down 20% to 30%. I believe there was an overreaction in the primary place.
In the second place, the Ukraine/Russia incident is nearly kind of normalised and individuals are rearranging and reorganising themselves. We’ve had an excellent harvest in South Africa – that actually additionally reacts to that. I believe there are indicators worldwide of a slower economic system; even worse is suspected meals inflation rising, rates of interest rising. The client can simply not afford it any extra. So my expectation is that it’s going to normalise even additional.
But what shields us as South Africans from even decrease ranges is the weakening rand. Of course that has an impact the opposite method. That you too can anticipate sooner or later; when politically we begin getting our act collectively it may additionally normalise.
FIFI PETERS: Do you imply due to import inflation and the truth that will probably be costlier to convey in some items?
FRANCOIS STRYDOM: Yes, positively. The delivery prices have been over-inflated, and I believe that may begin normalising because the world comes out perhaps a bit bit worse at first, however as we transfer by this kind of recession part I believe we’re at that low level the place issues may begin altering for the higher.
FIFI PETERS: For the higher in your earnings? What does the pull-back in these commodity costs imply for earnings in future? What does it imply in your plans going ahead?
FRANCOIS STRYDOM: Our enterprise is predicated on volumes and never on the commodity worth itself. So we’re a storer of the commodity, we promote inputs to the farmer, so the farmers’ profitability, after all, has been excellent in the current previous. That actually comes below menace now.
But our earnings are primarily based on volumes so long as there are good quantity flows by the totally different worth chains – and naturally we’re an acquisitive firm. We’ve simply completed a deal in Europe, in Germany, the place we purchased three totally different John Deere businesses.
So we’re increasing and, on the again of that, and naturally being extra environment friendly, our prospects are that the corporate will carry on producing wholesome earnings
FIFI PETERS: And load shedding? Is this an issue for your small business?
FRANCOIS STRYDOM: Absolutely, the entire worth chain. This is totally disastrous for each enterprise – from the small enterprise entrepreneur to the farmer. It wreaks havoc. It is an amazing drawback that we’re having. We see it persevering with for not less than the subsequent 10 years, this cycle, earlier than Eskom normalises, hopefully. But South Africans are great enterprise individuals. They discover methods round it; different vitality is exploding. We have invested tens of millions of rands in different vitality and we discover methods ultimately round it.
FIFI PETERS: We’re actually resilient as South Africans. We know learn how to make plans – plan Bs, plan Cs, plan Ds.
Francois, thanks a lot in your time. We’ll go away it there. Francois Strydom is the CEO of Senwes.