Zeder: Agri investors on the African prowl

Coming a week after a group of North American investors caused a stir around South Africa’s agricultural sector by offering to buyout AFGRI, the interim financial results of Zeder Investments were always going to enjoy extraordinary attention. And there was also the poultry protection matter which dominated headlines last week.

The JSE listed agri focused investment holding company, Zeder, may answer questions in many people’s minds about South Africa’s agri sector. The sector has seen increased corporate activity recently suggesting that it has suddenly regained its shine as an investment destination. What lies behind this movement?

And so off we went to the Zeder website to find fuller answers after perusing the figures for the six months ended August. Speaking as people who browse the net almost every minute to make sense out of business speak, it is rare to find the sensibility reflected in the ‘About Us’ section of Zeder .

The ‘About Us’ section of the JSE listed agriculture sector focused investment company, Zeder, is crisp in communicating the value proposition of the PSG created entity. It declares that: “The South African agricultural sector is characterised by asset-rich, well-managed and profit-producing companies. The sector has, however, remained neglected by the investment community due to barriers to entry that makes investment in these entities difficult for any party outside of the agricultural arena”.

And so Zeder has created a single entry point to a portfolio of diversified agricultural assets. The R4.3bn portfolio does feature the domineering exposure onto another JSE listed entity Pioneer Foods. Zeder is invested in Agri Voedsel, an unlisted investment holding company which owns 30.5% in Pioneer Foods. Agri Voedsel represented 39.2% of Zeder Investments’ portfolio of agri-businesses during the six months ended August.

Zeder Investments reported that recurring headline earnings per share increased by 8.2% to 9.2c in the six months ended August. The “sum-of-the-parts” (SOTP) value per share increased by 8.8% to R4.34 per share. The group said when reviewing the increase from 31 Aug 2012 to 31 Aug 2013, the SOTP value per share increased by 31.1% over the 12 month period.

Zeder Investments CEO Norman Celliers described the performance as “satisfactory and in line with expectations, bearing in mind that that the agri sector is cyclical in nature”.

Celliers said in line with its competitors, Pioneer Foods overall performance remained constrained by a prolonged high commodity price cycle and structural challenges within the poultry industry. “However, the core divisions within the organisation are performing well and Zeder remains optimistic about Pioneer in the long run and its new management”.

He said the interim financial results were mainly due to strong performances in companies where Zeder has substantial and direct interest.

Zeder increased its interest in Kaap Agri from 34.9% to 39.7% during the period under review. The company said Kaap Agri produced satisfactory results for the six months to March 2013 with headline earnings growing by 31,8%.  Kaap Agri is a retail, trade and services group which supplies a variety of products and services to the agricultural sector and the general public.

Zeder increased its stake in Capespan from 37.1% to 71.7% and said the operation continued to deliver satisfactory results. Recurring headline earnings per share increased 30%. Capespan specialises in the production, procurement, distribution and marketing of fruit from more than 12 countries to customers in more than 60 countries around the world.

Zeder owns a 92% interest in Zaad Holdings, a company that owns 100% of Agricol and 49% of Klein Karoo Seed Marketing. Zaad Holdings achieved 71.8% growth in recurring headline earnings per share. Agricol is a seed business established in both the South African and international markets. KKS is a seed company that develops and distributes vegetable, pasture and agronomic seed in developing countries, mainly Africa and the Middle East.

Celliers said Zeder has refined its strategy to mainly seek larger, strategic stakes in entities that allow it to play a more active role in its underlying portfolio companies. “Significant progress has been made in this regard and the investments in Zaad, Chayton Africa and Capespan are examples thereof”.

“Zeder is actively engaged with its existing portfolio of companies, while continuously seeking new opportunities and remains optimistic about the sector”.

Celliers added that the available cash and liquid assets for investment currently amount to R800 million. “We will continue to peruse new opportunities, especially when it fits in with Zeder’s current portfolio of agri businesses and is bound to unlock synergies within the portfolio.

Celliers said the sub Saharan regions offers huge growth opportunities.

The sub Saharan theme reappears via Chayton Africa, a holding company which currently owns and operates large-scale commercial farming operations in Zambia. Zeder said the vision of this company is to own and operate vertically integrated grain-related agribusinesses across Southern Africa. “While the company remains in the development phase, operational performance has been encouraging with actual agricultural yield results exceeding expectations. Zeder believes that the demand for primary food in sub-Saharan Africa is strong and sustainable and therefore remains optimistic about this investment”.

Zeder also highlighted the Africa wide prospects in Pioneer Foods saying the company is a leading food producer with strong fundamentals, which under new management remains well poised to benefit from the growing demand for food and beverages, both in sub-Saharan Africa and select international markets.

Clearly the agricultural business sector has regained extraordinary attention in recent times largely due to the drumming up of the theme; food security and the politics thereof. When the North American investors, via an entity called AgriGroupe, announced intentions to buy AFGRI, they flagged the sub Saharan region as a key attraction. The attraction is Africa’s potential to take off in industrial scale agricultural production. South Africa is in parts is seen as a gateway into the sub Saharan region. As Zeder notes, South Africa boasts a concentration of extraordinary skill and expertise in this sector. This is space worth watching.


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