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TWK Investments, the Piet Retief-based diversified agriculture and forestry company, has seen a slight decrease in its income for the year ended 31 August 2023, despite being able to grow its net asset value and revenue.
The company released a statement on 15 November that its revenue had increased by 4,6% to R9,7 billion, while the earnings before interest, tax, depreciation and amortization (EBITDA) from continued operations had decreased by just over 7% to R620,9 million.
The basic headline earnings per share decreased by 37,3% to 549,5 cents. A dividend per share of 115 cents was declared, while the net asset value per share rose by 8,8% to R57,16.
André Myburgh, CEO of TWK, said the past financial year was both challenging and rewarding. “We faced some strong headwinds which included, inter alia, increased volatility in the macroeconomic environment, volatile exchange rates, the sharp decline in commodity prices, weaker demand and delayed as well as cancelled sales of woodchips to China in the second half of 2023. These all directly affected volumes sold and placed pressure on our margins.”
Improved wood chip sales
The company’s revenue from continued operations increased by 4,56% from R9,23 billion to R9,65 billion primarily due to the strong growth in its timber segment on the back of growth in woodchip exports and local timber sales, Myburgh added.
Overall, the company’s timber segment reported an increase of 35,8% in revenue to R2,96 billion. This was mainly due to the growth in wood chip exports and local timber sales. During the year under review, 684,711 tonnes were exported from TWK’s facility compared to 634 664 tonnes in the previous year, representing a 7,89% increase in export sales.
Total sales volumes increased by 5,34% to 1 536 948 tonnes (August 2022: 1 459 106 tonnes) mainly given the international woodchip demand.
Retail and mechanisation
“Unfortunately, the performance of the retail and mechanisation segment came under severe pressure mainly due to the financial performances of Constantia Fertiliser as well as mechanisation,” Myburgh said. The main factors contributing to the decrease in profit were the continuous declines in fertiliser product prices and sales volumes as well as product price inflation.
Overall, the revenue for TWK’s retail and mechanisation segment decreased by 8,29% from R5,06 billion (August 2022) to R4,64 billion.
Myburgh said the weakened financial performance of Constantia Fertiliser and the mechanisation segment were the main reasons for this decrease in earnings. “EBITDA decreased by 78,87% to R48 million from R227,2 million (August 2022), with the EBITDA margin decreasing to 1,03% from 4,49% (August 2022).”
“Declining fertiliser product prices and sales volumes, as well as product price inflation, were negatively impacted by global fertiliser conditions which resulted in severe margin pressure on the overall business,” Myburgh said, adding that Constantia Fertiliser also encountered serious supply chain challenges during the year in review.
Mechanisation sales through the New Holland agencies decreased by 5,85% to 209 units (August 2022: 222 units) primarily because of the decline in sales in the Pietermaritzburg area due to the financial problems experienced by the sugar cane producers and the availability constraints of imported high kilowatt equipment from New Holland due to global logistics challenges during the first half of 2023.
Financial services improve
TWK’s financial services segment revenue increased by 23,32% from R220,33 million in August 2022 to R271,71 million, with EBITDA increasing by 21,16% to R108,38 million from R89,46 million (August 2022). The increase in EBITDA is mainly attributable to the strong performance delivered by the insurance division, Myburgh said.
Grain segment also looking stronger
The company’s grain segment was also able to improve its revenue by 0,87% from R1,74 billion (August 2022) to R1,76 billion as a result of the performance of the grain marketing business and the increase in maize product and higher animal feed prices, Myburgh added.
EBITDA increased by 12,59% from R50,4 million (August 2022) to R56,75 million, with the EBITDA margin increased to 3,22% (August 2022: 2,89%). “The disparity between revenue and EBITDA growth was mainly attributable to the impact of the high average grain prices, increasing selling prices, offset by the inability to recover some of these costs, specifically the animal feed business, and other variable cost hikes such as fuel and interest rate,” Myburgh concluded. – Susan Marais, AgriOrbit