KAL Group’s strong balance sheet, low debt and new fuel and retail sites in the pipeline mean it is positioned for a strong performance over the next 12 months, CEO Sean Walsh said yesterday.
Interviewed at the release of results for the 12-months to end-September 2024, he said “cash flow remains robust and our debt is at its lowest in a decade, positioning us for accelerated future growth,” despite a small dip in earnings in the past year.
Walsh said they had a pipeline of at least five fuel service stations with good retail and convenience footprints that could be acquired in the new financial year.
In the year to September 30, 2024, revenue fell 3% to R21.73 billion, gross profit increased 1.9%, while the dividend was unchanged at 180 cents per share. The final dividend fell to 126 cents a share from 130 cents after headline earnings per share fell 9.2% to 618.31 cents per share.
The main reasons for the lower earnings was high interest rates that made farmers cut back on farm expenditure, high fuel prices which dampened travel, while less mining activity and increased road construction resulted in less traffic on the N3, N7 and N2 highways, and less fuel sales, he said.
The increase in gross profit reflected a focus on merchandising for profit and growth in retail mix. Expenditure was kept to a 4.5% increase, with load shedding savings contributing R36 million. Earnings before interest tax depreciation and amortisation (EBITDA) fell by 4.4% to R859.3m.
“We are excited about our expansion plans, which align with our 2030 strategy and focus on high-growth areas,” Walsh said.
He said they had re-entered an acquisitive growth phase sooner than anticipated, due in part to the repayment of debt for the last acquisitions.
Agricultural conditions, critical to the group’s Agrimark divisions, were also showing improvement after a challenging year. Port constraints, although not eliminated, were slightly better than last year.
“High interest rates had a noticeable impact on spending by farmers. Total SA farm debt amounted to about R260bn as at the end of July 2024, which attracted an additional 4% interest in the last year. This cost farmers R10bn in interest payments that were not there two years ago,” Walsh said.
Producer cash flow pressure was evident during the period, but there were cost decreases in key agricultural inputs, combined with the expected further reduction in interest rates, which bode well for the year ahead, said Walsh.
High levels of rainfall were recorded during the wheat season, which led to challenges around fertilising and pest control in key areas. A below average wheat yield and a lower canola harvest were expected across the entire Swartland region.
This was, however, only expected to have a small impact on next year’s results.
The outlook for fruit and vegetable production in the upcoming agricultural season however looked encouraging, he said. The wine and table grape season yields looked promising.
Both the Agrimark and TFC (The Fuel Company) segments showed resilience, with TFC lifting profit before tax 1.8% despite tough market conditions, whilst Agrimark continued to perform well in its core sectors, focusing on market share gains.
“Lower fuel prices are already injecting roughly R8.5bn a month into the economy at current levels. The improved outlook for GDP growth, bolstered by energy stability and greater political certainty, will impact business and consumer confidence positively,” Walsh said.
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