Finansiële Resultate met Francois Strydom

A super commodity cycle was experienced from 2000 to 2010, due to the fact that these were good rainfall years.  The best of two worlds was experienced, characterised by higher production due to higher prices, increased volumes and a growing GDP.

 

However, the cycle changed from 2010/2011.  Over the past six production seasons we experienced three bad years, the last having been the worst, as well as one normal and one average year. This situation was worsened by the fact that it followed on 2014/2015, which had been a sub-optimal year.

 

In Senwes terms it means that our grain carry-over stock levels decreased in terms of utilisation capacity.  Secondly our client base is under pressure.  Producers are cutting back on capital items and cost savings are at the order of the day. Volumes are lower and margins are shrinking, which are preventing stock levels from increasing. This is putting pressure on the balance sheet due to higher costs.  All these things resulted in a lower profit, namely the R156 million net profit reflected for the past financial year. 

 

We are experiencing the effect of two seasons - the previous year's crop and the new year's plantings. A very small crop with low volumes are expected for the new year, due to the fact that planting levels were 32% lower. The 68% hectares which were planted also rendered sub-optimal yields.  Where we normally handle approximately 2,6 million tons of grain, we will be handling approximately 1 million tons only this year.

 

The effect on the net profit Iine was R100 million in the 2015/2016 financial year.  The potential for the current year is R150 million less.  In reality the drought will have an impact on three years.  The effect for the 2017/2018 year is estimated at R40 million to R50 million - a total potential impact of R300 million.

 

Senwes had a turnover of R9,2 billion and a net profit of R156 million and cash of R500 million was generated from our operating activities. The cash is critical for our interest account, with clients being under severe cash flow pressure, an increased balance sheet and more money being spent on financing costs. In addition the dividend policy has to be maintained. We still delivered a return on equity of 8,5%.  The net asset value was 48,7 cents per share higher, despite the difficult conditions, which means that Senwes is still increasing shareholder value. A final dividend of 20 cents per share was declared, which brings the total dividend for the year to 45 cents per share.  A dividend yield of 3,9% on opening market price is therefore reflected.

 

Grain flows were lower but still good over the past year.  Grainlink delivered relatively good results and we are well-positioned as far as grain management ability is concerned and cost efficiency is receiving focused attention. Input businesses were under pressure but Grainovation and Certisure managed to deliver good results.  Senwes Credit was also under pressure.

 

Lower grain volumes will result in pressure on divisions.  Clients will have less available capital and the repayment ability of clients will also be under pressure. We are facing a difficult year and we will have to be very effective. 

 

Client focus

Normally Senwes and the client sit on opposite sides of the table.  It is now expected from Senwes to walk around the table and to assist the client with his business, long-term requirements and solutions. We should no longer just sell a product - we should sell solutions.

 

Secondly the Senwes structure is divided into different divisions - focus and skills are structured separately, which makes sense internally.  However, this should not prevent us from serving the client in an integrated manner.

 

Even if you sell tractors, you should tell your client when he does not need a tractor but rather mechanisation planning.  Then you are busy with integration. The client is thereby assisted by the agri-economist  to generate cash, in order to be able to buy a tractor next year. 

 

Integration

An overlapping of 30% exists in respect of the client bases of the different Senwes divisions. It means that there is a 70% potential for divisions to introduce clients to one another.  Potentially it could have an impact of R100 million on the bottom line. There is a huge ability internally to generate a higher income.

 

Financial facilities were renegotiated and increased by R1 billion due to the financial pressure on clients, but also for the purpose of financing Senwes' internal growth. Remember:  the client cannot save himself out of trouble.  He has to farm himself out of trouble. We have to be patient with the repayment of previous season debt and we have to assist with financing for the new year.  We are in a make-or-break year.

 

A committed board of directors and committee structures which focus on their work, as well as exceptional personnel who remain motivated, despite the daily challenges, are of the utmost importance in such a difficult year. A client base which understands what we are going through and which realises the value of having a partner such as Senwes, who walks around the table to assist the client, is also critical. Input suppliers to support us during difficult cycles are also of the utmost importance. 

 

I would like our business to make a meaningful contribution to the community, the economic activities of our community, the production ability and to the people working for Senwes. Only then will be be making an effective and productive contribution to South Africa. Do the right things right in order to make a positive contribution to South Africa.

 

I would like to thank you and at the same time appeal to you to try even harder to improve yourself, Senwes, the community and South Africa in the process. We have nowhere else to go. We have to make our country work! Thank you to every staff member who worked hard this year and who will face the new year and the future with courage.