- Revenue from continued operations increased by 4,6% to R9,7 billion
- Earnings before interest, tax, depreciation and amortisation (EBITDA) from continued operations decreased by 7,1% to R620,9 million
- Basic headline earnings per share decreased by 37,3% to 549,5 cents
- Dividend per share of 115 cents
- Net asset value per share up by 8,8% to R57,16
TWK Investments Limited (TWK or the Group), a diversified agriculture and forestry company that operates through the following segments, namely Timber, Retail and Mechanisation, Financial Services and Grain, reported final results for the year ended 31 August 2023 today.
André Myburgh, CEO of TWK, commented: “The 2023 financial year was both challenging and rewarding for TWK. 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 2H2023. These all directly affected volumes sold and placed pressure on our margins.”
TWK is in the process of disposing of its dealerships and as at 31 August 2023, the Motors segment has been classified as “discontinued operations” and “assets-held-for-sale”. The terms and conditions to the transaction are still being negotiated.
Revenue from continued operations increased by 4,56% from R9,23 billion to R9,65 billion primarily due to the strong growth in the Timber segment mainly on the back of growth in woodchip exports and local timber sales, with positive contributions coming from the Financial Services and the Grain segments. Unfortunately, the performance of the Retail and Mechanisation segment came under severe pressure mainly due to the financial performances of Constantia Fertilisers as well as Mechanisation. 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.
EBITDA from continued operations decreased by 7,14% to R620,98 million mainly as a result of the performance of the Retail and Mechanisation segment.
The Timber segment reported an increase of 35,80% in revenue to R2,96 billion for the year under review. 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 prior year, representing a 7,89% increase in export sales. The improvement was mainly the result of the demand from pulp manufacturers in Japan.
No woodchips were exported to the Chinese market as well as woodchip exports to Europe that did not materialise during the 2H2023 due to the economic declines in these countries and the negative impact of the prolonged Russia/Ukraine war on the demand for paper and packaging. The depreciation of the Rand supported the woodchip export margins. Total sales volumes increased by 5,34% to 1,536,948 tonnes (August 2022: 1 459 106 tonnes) mainly given the international woodchip demand. EBITDA increased by 9,82% from R353,96 million (August 2022) to
R388,73 million, however the EBITDA margin decreased from 16,25% (August 2022) to 13,14%.
Revenue for the Retail and Mechanisation segment decreased by 8,29% from R5,06 billion (August 2022) to R4,64 billion. This division’s results came under severe pressure mainly as a result of the financial performances of Constantia Fertiliser as well as Mechanisation. EBITDA decreased by 78,87% to R48,00 million from R227,20 million (August 2022), with the EBITDA margin decreasing to 1,03% from 4,49% (August 2022).
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 Fertiliser product sales, the largest sales contributor for TWK Retail, were negatively impacted by volatile local and global fertiliser conditions which resulted in severe margin pressure on the overall business.
Throughout the financial year, Constantia Fertiliser encountered supply chain challenges as well as experienced high volatility in nitrogen, phosphate, and potassium prices. The volatile Rand/Dollar exchange rate also contributed to a much more complex fertiliser planning environment to enable the business to source raw materials at reasonable prices. Fertiliser sales for the year ended 31 August 2023 declined by 10,74% from 208 955 tonnes (August 2022) to 186 501 tonnes. Lower sales volumes were attributed mainly to farmers postponing the purchase of fertiliser products due to high selling prices in 1H2023, lower fertiliser application rates throughout the year and planted crops using less fertiliser in 2H2023.
Mechanisation sales, through the New Holland agencies, decreased by 5,85% to 209 units (August 2022: 222 units) primarily as a result of the decline in sales in the Pietermaritzburg area due to the financial problems experienced by the sugar cane farmers and the availability constraints of imported high kilowatt equipment from New Holland due to global logistics challenges during the 1H2023, and farmers being under pressure due to higher interest rates and price inflation.
The Financial Services segment’s 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. The Insurance Division reported a 7,3% growth in short-term insurance premiums written for the year ended August 2023 compared to August 2022, which resulted in growth in commission income of 4% for the same period. The short-term section of the Insurance Division focused on the enhancement of customer service and overall experience, thus increasing profitability, resulting in a 6,2% increase in fee income. The Medical Insurance Division reported revenue growth of 23,7% as a result of an increase of 24,2% in members from 5 140 members as at 31 August 2022 to 6 385 members as at 31 August 2023. Production Credit Book grew strongly by 13% during the financial year and peaked at R916,7 million (peak 2022 financial year: R808,6 million).
The Grain segment’s revenue increased by 0,87% from R1,74 billion (August 2022) to R1,76 billion) as a result of the performance by the Grain Marketing business and the increase in maize product and animal feed prices. EBITDA increased by 12,59% from R50,40 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.
Basic headline earnings per share decreased by 37,25% to 549,54 cents. The net asset value per share of the Group increased by 8,77% from R52,55 (August 2022) to R57,16 as at 31 August 2023. The Group’s cash generated from operations after working capital increased by a pleasing 81,81% to
R673,14 million. A dividend per share of 115 cents has been declared for the year ended 31 August 2023.
Eddie Fivaz, CFO of TWK, concluded: “We have proven our ability to succeed within the sector we operate in and are capable of adopting and moving forward with our strategic objectives. We are constantly looking for expansion opportunities to enhance profitability and will continue to evaluate the return on the different investments and will act in the appropriate manner in a drive to unlock stakeholder value over the long term.”
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