Agricultural group KAL (formerly Kaap Agri), which owns retail stores that sell farming equipment, petrol stations and fast-food stores, posted a healthy set of results to end-September but said “load-shedding ate a big piece of our pie”.
CEO Sean Walsh spoke to Business Day about how farmers, KAL’s main target market, deals with load-shedding and port challenges.
You say load-shedding really cost the group. Please elaborate.
It would have been an outstanding year if it weren’t for load-shedding. We immediately spent money on alternative energy sources, so we could slowly reduce the effect of load-shedding at petrol stations.
Of the R63m that load-shedding cost us directly, 75% of that was incurred at company fuel sites, which run for 24 hours.
Agrimark’s retail division is only a daytime operation and doesn’t have much refrigeration, so the effect of load-shedding was lower.
How were farmers affected by load-shedding and how did this weaken Agrimark’s store sales?
The apple farmer harvests in February. He must put all his apples in a cold room. It must run irrespective of load-shedding or the apples will have to be thrown away. He has to spend money on [diesel for the cold room] and curtail any other expenditure.
A farmer will spend 10%-15% each year on maintenance. This includes putting up new nets and poles and planting new orchards. Farmers had to cancel all that infrastructure spend this year. However, we started seeing an uptick in retail spend from August.
Surely you sold generators and power equipment to farmers? Why did your Agrimark retail stores lose out on sales?
The sale of power equipment doesn’t make up for the lost sales overall. If I sold R50m worth of generators it’s a hell of a lot, but I still lost R140m in general sales.
Why did port challenges affect your retail market?
Some of our customers export fruit. They need ports to be effective to get food to Europe within the product’s shelf life. Table grapes get harvested, and then stand in the harbour for a week [due to port delays]. Irrespective of the fact that it’s been refrigerated in a plug-in container, it loses that week’s shelf life. In some cases, Europe will reject the product.
But you have heard good news about port issues?
There is an agricultural logistics working group that has been working with Transnet for the last year-and-a-half. They plan to dedicate a berth in Cape Town for fruit exports, which is going to start in the second week of December. It might alleviate some delays.
Your company still did well despite the challenges and grew 5% in like-for-like revenue, excluding the 40 new petrol stations.
Absolutely. We immediately curtailed our operational expenditure for the year. We sourced energy solutions for our customers and sold products that assist farmers with power.
Obviously load-shedding was bad for our farming community but the general consumer started buying more convenience retail food. People driving home knowing the power is off decide to buy a takeaway. The quick-service restaurants at petrol stations have shown growth for the year.
Are you happy with your purchase of fuel retailer PEG, which owns 40 petrol stations operating under the Engen, Sasol, TotalEnergies, BP and Shell brands?
We completed the PEG acquisition, which is a very large group, and it has delivered on expectations, so that’s why we were able to still show really strong overall revenue growth of 42.7%
This interview has been edited for clarity and brevity.
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