Zeder Investments, an investor in broad agribusiness, reported a fall in earnings for the interim period to August 2017, mostly due to its 27% interest in Pioneer Foods, its largest investment.
PSG-affiliated Pioneer Foods, which made up 52.3% of Zeder’s portfolio in the most recent interim period, reported weaker earnings in the interim period ended-March 2017.
Headline earnings per share nosedived 69.9% to 4.3c in the latest period. This gave the group attributable earnings of R127m from R214m in the same period in 2016. Zeder’s underlying investment portfolio was valued at R14.1bn at the end of August.
"I think it’s clear from a profit point of view that it has been a very tough six months," Zeder CEO Norman Celliers said.
He said that Pioneer Foods had weighed on the group: "I think the market expected profits in the first half to be significantly weaker." SA’s widespread El Nino drought in 2015-16 had been a key negative factor for agriculture. That was now over and the benefits were starting to flow through, Celliers said.
The Western Cape was in the middle of a water crisis, but Celliers said the diversity of Zeder’s overall portfolio limited its exposure to this.
Zeder said the two main benchmarks that measured performance were sum of the parts (SOTP) value per share and recurring headline earnings per share. SOTP seeks to determine what divisions would be worth if a conglomerate was broken up and spun off or acquired by another company.
Calculated using the quoted market prices for all JSE-listed investments and market-related valuations for unlisted investments, Zeder’s SOTP value per share fell 9.5% to R7.72 at the end of August 2017. At the close of business on September 26 2017, Zeder’s SOTP value per share was R7.17.
Damon Buss, an analyst at Electus Fund Managers, said the key driver in the fall in SOTP value per share was a 31% plunge in the value of Zeder’s share in Pioneer Foods between the end of February 2017 and end-September 2017.
"The national [El Nino] drought is the main cause of Pioneer Foods, and hence Zeder’s, issues," he said.
But Buss said with soft commodity prices staying relatively low due to expectation of decent crop levels in 2018 and a large carry-over from 2017, and consumers being in a slightly better position, Zeder’s SOTP value per share should improve.
Zeder said it continued to drive for additional growth from its existing investment platforms while also aiming to add to its portfolio when opportune.
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