Diversified agriculture and forestry company TWK Investments’ taxed profit fell sharply by 52% to R96 million in the six months to February 29 but its management expects a much stronger second half.
Basic earnings per share and headline earnings a share decreased to 311.1 cents and 351.7 cents, 43.7% and 10.1% lower than the corresponding period, respectively.
André Myburgh, the CEO of TWK, said in an interview the results had been impacted by their timber segment’s woodchip stockpiles, the quality of which were severely impacted by a neighbour’s fire in Richards Bay, and the segment did not generate income for most of the reporting period.
The fire at NCT Woodchip Mill started on September 30, 2023, and burned for two weeks
In addition, in TWK’s Retail and Mechanisation segment, revenue fell after farmers spent less on new equipment following two years of strong spending on this, and due to a generally weaker financial situation of farmers.
Myburgh said, however, that Constantia Fertiliser, which benefited from higher fertiliser prices, and the Grain and Financial Services segments positively contributed to the results.
Discontinued operations consisted of the 100% stake in TWK Motors, which was classified as assets-held-for-sale. Negotiations were underway for the sale of the shareholding. TWK Motors comprises Toyota, Isuzu and Haval dealerships and the negotiations had taken a little longer than anticipated, said Myburgh.
Group revenue and earnings before interest tax depreciation and amortisation from continued operations fell 13.7% to R4.2bn and 27.6% to R285m, respectively.
Although TWK’s woodchip facility, located adjacent the NCT facility, incurred no fire damage, the impact on the quality of TWK’s stockpiles was extensive and operations had to cease for a significant period.
The stockpiles had to be sprayed with fire detergent to prevent them catching fire. The impact on the business was estimated at R255m, while TWK received a final insurance settlement for stock damage and clearance, business interruption, and expenses, of about R160m.
TWK Timber had orders for five shiploads of exported woodchips and as a result, all these ships had to be cancelled, resulting in TWK not exporting any woodchips to Japan for five months during the reporting period.
Consequently, only 43 247 tons were exported from TWK’s facility compared to 341 263 tons in the prior period, a sharp 87% decrease in export sales. A large portion of the damaged woodchips was sold to biofuel markets at reduced prices, said Myburgh.
He said production was currently at full capacity and a robust performance was expected from the Timber segment for the rest of the financial year.
The Timber segment’s revenue and EBITDA declined by 35.19% to R946.67m and 60.08% to R89.30m, respectively.
Revenue for the Retail and Mechanisation segment fell by 11.45% to R2.29bn as it was impacted by lower sales volumes across the retail and mechanisation operations offset by an improved performance from Constantia Fertiliser.
“This correlates with the financial strain experienced by most farmers and consumers in the areas in which we trade as everyone grapples with tough economic conditions in the retail market, higher interest rates, increased diesel bills, uncertain political environment due to upcoming elections, and a decline in production facilities to farmers,” said Myburgh.
Commercial farmers and consumers were purchasing products just as needed to protect their cash flow, he said.
Ebitda, however, increased by 29.69% to R61.53m due to the improvement in Constantia Fertiliser’s profit and better cost management.
The Financial Services segment’s revenue increased by 1.48% to R128.89m. The total crop insurance premium increased by 0.88%, resulting in a 1.24% rise in commission received.
The Grain segment’s revenue and Ebitda increased 21.3% to R814.88m and 108.53% to R23.54m, respectively.
This was due to a good performance by the Grain Marketing business and the increase in maize product and animal feed prices.
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