Agricultural group Crookes Brothers estimates the war in Ukraine will up its agricultural costs by almost two-thirds amid a surge in fertiliser, chemical and energy prices.
The company, which produces sugar, bananas, apples and macadamia nuts, did not declare a dividend for its 2022 year when it released its annual results on Thursday as it estimated the ongoing conflict will increase its agricultural costs by R58.2m in its 2023 financial year.
“Management has worked hard to re-engineer its application programmes to be as efficient as possiblebut these increased costs are unlikely to be fully recovered in the short term from price increases that can be passed on to our end customers and consumers,” the company said.
Fears of a global recession and inflation are pushing up food prices while central banks across the world have hiked interest rates to battle higher inflation.
Revenue was up 7% to R678.6m. Sugar cane accounted for more than half of sales, followed by bananas (15.2%) and deciduous fruit (15%). Profit rose 84.5%.
Revenue and total operating profit from sugar cane, however, fell by 4% and 46% respectively, largely because of sugar cane that had to be carried over to next season because it could not be harvested and delivered to mills. This was worsened by civil unrest in KwaZulu-Natal and a strike in Eswatini which led to the closure of Ubombo Sugar Mill for prolonged periods in the harvest season. As a result, the company could not deliver 28,514 tons of sugar cane, amounting to R17.4m in lost revenue.
Operating profit from deciduous fruit more than quadrupled to R16.5m on record crops. Bananas more than tripled to R15.4m as crops were spared from major storms such as the one that destroyed 4,500 tons of bananas at its Nicoskamp farm in Mpumalanga in 2021.
“We continue to ride the wave of high banana prices but are mindful of more and more growers entering the industry and the inevitable consequential impact on supply leading to a likely price reduction,” the company said.
The macadamia harvest was the largest since the Murrimo operation in central Mozambique started production in the 2018 financial year. Average prices, however, came in below budget due to the rand strengthening against the dollar during the company’s peak selling period and a general fall in global macadamia prices.
On top of this, large macadamia shipments were in containers at the port for prolonged periods due to supply-chain disruptions caused by the Covid-19 pandemic. The heat stress suffered in the containers affected the moisture and quality of the macadamias, leading to customers rejecting them or buying large quantities at discount prices. The result was R13m in lost revenue and an operating loss of R3.9m.
Meanwhile, the company expanded further into Mozambique by investing in macadamia development there during the past year and has set aside money for a 60 hectare banana expansion in Eswatini.
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