Diversified agriculture and forestry company TWK Investments has reported a surge in profit for the six months to end-February, driven by demand for timber and a global shortage of fertiliser.
The Transvaal Wattle Growers Co-operative (TWK), is a diversified group of companies operating in the agriculture, motor and tyre, forestry, grain and financial services industries across seven provinces.
Founded in SA more than 80 years ago, TWK is listed on the Cape Town Stock Exchange (CTSE) and has a secondary listing on A2X Markets.
In its five months of operation, the CTSE has a total market capitalisation of more than R9.7bn, while A2X, which was established in 2014, boasts R4.047-trillion.
Companies drawn to the small exchanges are usually after a reduction in red tape and the lower cost of listing.
On the eve of listing on A2X in November, A2X CEO Kevin Brady said the secondary listing not only provided the company with a platform to access the institutional asset management market, it also gave it an opportunity to attract potential new investors, growing liquidity in its shares while also broadening its shareholder base.
“For the first time, a company looking to list can consider an alternative exchange and gain access to both retail and wholesale markets,” Brady said, adding that TWK was the first company from the agricultural sector on A2X.
TWK’s interim after-tax profit jumped 175.5% to R246.65m as improved general trading conditions in the period lifted sales and net profit in the timber, retail and mechanisation segments.
Continued demand amid a dwindling supply of raw logs has led to surging timber prices in recent months. Russia’s attack on Ukraine has aggravated this further.
Revenue rose 30.6% to R4.88bn from R3.74bn in the half-year.
“Significant contributors to these excellent results came from an increased demand and sales to key timber markets,” said TWK director André Myburgh.
TWK said that while mining timber sales fell, the export market of woodchips had risen, resulting in an increase of 47% in timber sales volume.
The strong demand for wood chips from some of the largest pulp and paper producers in Japan, China and Spain is expected to spread to other European countries as a result of the Ukraine-Russia war, TWK said.
International pulp prices are trading at record prices, which are expected to continue for several months.
Myburgh said increased market share was driven by a steep rise in fertiliser prices due to global shortages.
The company’s grain storage and marketing divisions, which produce its trademark maize and animal feed as well as focus on hedging and selling maize and soya beans, were boosted by strong crop yields.
The renewable energy segment, Roofspace, signed lease contracts with another eight shopping centres during the year, bringing the total to 12 malls at the end of February.
“The group’s financial position is solid, with total assets having increased 28.9% from R4.91bn to R6.32bn,” said financial director Eddie Fivaz.
Management said it believes its second half will outperform the corresponding period in 2021.
The company said the expected sale of its loss-making fuel sites in the coming months will unlock cash and support the profitability of its motor and tyre segment, which reported a 15.4% rise in revenue in the half-year.
The growth was a result of increased vehicle sales and better profit margins due to a shortage of stock.
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