Diversified agriculture and forestry company TWK Investments says some of its products such as woodchips were contaminated by the carbon dioxide released by recent fires at Richards Bay, and will have to be sold to new markets.
In an interview with Business Day on Wednesday after the company reported a 37% drop in annual profit, CEO André Myburgh said that while the business wasn’t directly affected, making paper from pulp, often involving the use of woodchips, is a sensitive process.
As a result, its inventory at the harbour affected by the fire in October at NCT’s woodchips factory will have to be redirected to bio-energy suppliers.
Business has been at a standstill for the past two months while the company looks for new buyers. Thereafter the premises need to be cleaned before being able to produce woodchips again.
The group has also been affected by the deteriorating performance of Transnet as it previously relied on the state-owned freight and logistics group to transport logs to the harbour. Now it’s transporting the goods by road — at a higher cost — though it wants to be granted the tight to manage part of the Richards Bay harbour where it operates.
“We cannot pay them [Transnet] and then we have to do the maintenance and manage it, but we are in constant discussions with them,” Myburgh said. “Something first has to break and cause greater damage before something is done [by Transnet].”
Meanwhile, the ongoing power cuts and the high cost of running diesel generators also pushed up operating costs.
TWK Investments, which is listed on the Cape Town Stock Exchange (CTSE) and the A2X, is based in eMkhondo (formerly Piet Retief) in Mpumalanga and has businesses ranging from timber and forest plantations to grain, retail, insurance and financial services.
Profit for the 12 months to end-August fell as woodchip exports to China and Europe were cancelled and the group felt the effects of lower fertiliser prices.
TWK, which is valued at about R2bn on the CTSE, said headline earnings per share (HEPS) fell 37.2% to 549.54c, and profit from continuing operations by 17.8% to R301m.
“We faced some strong headwinds that 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,” Myburgh said.
Revenue from continuing operations — its motors segment is for sale — improved 4.6% to R9.7bn, driven by the growth of the timber segment after higher woodchip exports and local timber sales, but operating profit was down 16.2% to R514.3m. A dividend of 115c was declared, down 23.3% year on year.
The retail and mechanisation segment, the biggest by revenue, was hit by the continuing decline in fertiliser prices and sales along with input price inflation.
Fertiliser sales were down 10.7% to 186,501 tonnes as farmers delayed purchases in the first half of the financial year when prices were higher, and planted crops using less fertiliser in the second half.
Fertiliser prices surged at the start of the war in Ukraine, but have since come down.
Over the past year, the number of products exported by the timber segment, the biggest by operating profit, improved 7.9% to 684,711 tonnes after stronger demand from pulp manufacturers in Japan, and sales volumes lifted 5.4% to 1.5-million tonnes.
“No woodchips were exported to the Chinese market and woodchip exports to Europe did not materialise during the second half of the 2023 financial year 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 group said.
Myburgh added: “Major economies like China expect modest growth due to housing market challenges, which could constrain growth prospects.”
Updated: November 15 2023
This story has been updated to include comment by TWK’s CEO
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