Interim results with Francois Strydom

The profit after tax of R103 million is 9.7% lower than the corresponding period of the previous year.  The reality of lower volumes and the 42% decline in the quantity of grain received should place the 9,7% referred to in perspective. Strydom is of the opinion that the balance sheet and cash flow statement are actually much more important than the income statement.  "It reflects the longer term soundness of the company." 

Taking the 42% decline in grain volumes into account, our results should actually have declined by a much higher percentage.  Why did it not happen?  Senwes is known for its structured and disciplined conduct and actions, which reflect in cost control and efficiency ratios.  In addition the debtor book is managed scrupulously.  The respective business units managed to maintain market share and certain business units, such as Grainlink Silo Operations, Senwes Credit and Senwes Equipment, even managed to expand market share.

"Firstly, do not wrap reality in flowery paper.  When you are in business you need to squarely face reality.  Secondly, the attitude with which you run your business, irrespective of circumstances, is absolutely critical.  It is important to realise that bad things will happen.  However, bad things have to be dealt with in the correct manner."

“We are currently dealing with a natural phenomenon, namely El Niño, the impact of which is huge. It is not something which may happen.  It has already happened and it is busy happening.  We see it in the lower rainfall patterns, temperatures which are much higher than average and exceptionally high wind volumes."

It must be borne in mind that we had a very dry year in 2014.  The current incident therefore impacts dramatically on the already dry soil profile.  Africa and South Africa usually deal with extremes - abundance or famine - which is typical of the African continent. However, the El Niño phenomenon is an extraordinary event.

With the exception of a few countries, the global GDP and consumers are under pressure.  The South African exchange rate has already declined by 25%, which has an effect on food prices at the most basic level of food supply and the effect on the lower LSM groups was in the region of 23% to 25%.

Social unrest is at the order of the day.  Service delivery demonstrations such as #feesmustfall and others, are all indications of the high unemployment rate, the pressure on consumers, impatience with political nepotism and criminal activities. The level of impatience amongst ordinary working and peacable people is very high. This is the reality of the situation.

“Plan for the worst and hope for the best.  Having said that - you have to be positive.  If you are in business and you are negative, you are definitely in the wrong place.  With negativity comes fear, which means that you are at a disadvantage.  You will then be unable to make resourceful plans. It is a human thing. ".

We will continue with our programmes.  In respect of central grain storage we will increase the grain intake capacity as well as the grain intake speed and the ability to aerate grain.  We will also continue with the rolling out of the Graintech programme, which will require a capital outlay of more than R100 million. Any decision to discontinue such programmes during difficult times should be questioned.

Over the past 18 months we launched two new mega-branches at Wesselsbron and Hoopstad.  Naturally it will put us under pressure over the short term. However, should we fail to invest now it will be to our disadvantage in more prosperous times.  We have also decided to replace the Grainovation fleet, which has been in use for a number of years.  Some of the trucks have already done more than 800 000 kilometres.

Senwes further managed to successfully negotiate the largest single maize contract in the country.  It competed with 12 other bidders and all the multi-national companies which participated in the process. The maize contract had been awarded to one of these multi-national companies for the past 15 years.

The highest tractor market share in history was maintained by Senwes Equipment. 

A positive cash inflow of R500 000 was reflected for the first six months of the financial year.  Operational activities alone reflected a positive cash flow situation of R187 million after costs and tax.

A good dividend flow is being maintained, which means access to a positive cash flow situation for farmers.  Share prices were maintained, which left producers with an improved ability to support themselves.

We launched five actions which speak of positve intervention.  The Drought Disaster Fund was launched, to which Senwes donated R1 million.  Large contributions were also received from other businesses such as Overberg Agri, Monsanto and Beefmaster.  The Senwes Pensioners Club also made a donation and Corporate Marketing issued a challenge to all personnel in this regard. 

Hinterland assisted with the immediate need for animal feed and water by selling equipment and other products at minimal margins (margins totalling R4,5 million).

Grainovation rendered assistance in the form of subsidised transport of fodder and Agricultural Services rendered drought management assistance to farmers to ensure proper management of animals and crops.  Senwes Credit met with a large number of clients to evaluate their individual situations.

“It means that we are intervening on a humanitarian level.  Not only as far as Senwes producers and their farm workers are concerned, but on all levels.  The manner in which we deal with every individual client speaks of understanding, patience and the retention of business.”

The ability of the government to support commercial agriculture is limited.  This is an economic and political reality. Assistance is being rendered to emerging farmers in an attempt to canvass for votes.  The commercial agricultural sector is, however, self-reliant. It creates a vacuum, but we will continually ask for assistance. 

“In my daily liaison with similar large companies in the sector, input and service providers, I only receive feedback relating to positive support.”

“I don't think the same measure of support exists in any other sector.  The reality is, however, that you also have to protect your business in a time like this.  This means that business disciplines can not simply be cast to the wind and doors can not merely be thrown open.”

Manage effectively and carefully and afford scrupulous attention to all matters.  Think continuously about what else you can do and, even more important, think about what you can do better.

Senwes publicly acknowledged its dependence upon the Creator and participated in various prayer actions.  We unequivocally declare that we are totally dependent upon the mercy of our Heavenly Father.

It is a reality that the situation will probably worsen before it gets better.  The effect of the drought will be felt for the next three years.  In Senwes' case the impact on the current year will probably be between R40 million and R80 million and approximately R120 million to R180 million on the next year, based on the assumption that 2016 will be a normal year.  Another drought would have catastrophic results.

“I think we have dealt with the situation in the best possible manner, given the measures we put in place.  We hope that it will protect the company and ensure its sustainability."

“In times such as these staff remains our biggest asset - which will of course also be tested now.  The end result of the next 18 months will depend on the management of the group, which is in our own hands. This is where the wonder of human nature comes in - we have the ability to make choices.  The test is, however, how we deal with the consequences of our choices and the actions we take. 

The message to producers is clear. “Please do not wait in a stressful time such as the present.  Contact your credit suppliers without delay and discuss any problems with them. Only then will you be able to plan.  It is not the time to go into hiding and keep quiet.  Most farmers are realistic and pragmatic and they deal with such incidents and make new plans.”