Bringing the Inside of Agribusiness Conditions August 2015

AGRI-BUSINESS EQUITY

The Agribusiness index performed well on JSE in the reporting month of August. The

overall index for Food producers, Food & Drug retailers and Forestry & Paper showed an

increase of 0.55%.

1. JSE Agri-Indices (overall)

31/07/15 31/08/15 % Change

Food Producers 8527.1 8698.17 0.27

Food & Drug retailers 10363.5 10052.86 -0.81

Forestry & Paper 48455.8 48850.65 1.89

All share 52108.9 49972.3 0.55

The index for Food producers increased by 0.27% from a month ago. The Index for Food &

Drug declined by 0.81%. Forestry & Paper increased by 1.89%.

Agri-Business Insight

Highlights

JSE listed Agricultural Food producers, Forestry and Paper performed well in the reporting

month of August while; those of Food and Drug retailers did not perform well.

Volume of shares traded on JSE decreased for majority of agribusiness firms.

Dividend yields of agribusiness firms were mixed, with 50% increasing and the other 50%

declining.

OTC shares remained unchanged for Senwes and Agri Voedsel; while those of KAAP Agri

saw a significant decrease.

Agribusiness firms are performing well and some are merging with other partners to

maximize their profit, increase investment and minimize risk.

Agri-Business INSIGHT August 2015

2

2. Individual day’s volume

3. Dividend yield

4. Food producers share prices

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

Da

y's

vo

lum

e

Figure 1: Day's volume

TONGAAT MONDILTD YorkTGB PNR OceanaAstral AVI

00.51

1.52

2.53

3.54

4.55

Div

iden

d y

ield

Figure 2: Dividend yield

AVI Astral OceanaPNR TGB SPARMONDILTD TONGAAT

0

5000

10000

15000

20000

25000

30000

35000

Sh

are

pri

ces

Figure 3: Food producers share prices

AVI Clover ILLOVOPioneer Foods Tiger Brands TongaatOceana

Figure 1 indicates that the

volume of shares traded on

JSE were volatile during the

reporting month. However on

average Astral, AVI, Oceana,

Tongaat and Mondi LTD

decreased during the month of

August. The decrease implies

that their shares are not traded

much, due to low demand. The

volume of shares traded on JSE

for Tiger Brands, York and

Pioneer Foods increased.

Figure 2 illustrates the average

dividend yields for York, Astral,

Pioneer Foods and Mondi LTD

decreased in August compared to

the previous month. However,

AVI, Oceana, Tongaat and Tiger

Brands average dividend yield

increased. This might due to good

performance reported in the

agribusiness firms.

Figure 3 shows the average

share prices for AVI, Clover,

Illovo, Pioneer Foods, Tongaat

and Oceana decreased. The

decrease implies that the capital

of investors is falling due to

negative sentiments. However,

Tiger Brands share price

increased.

Agri-Business INSIGHT August 2015

5

5. Food producer’s price earnings

6. OTC shares

05

1015202530354045

P/E

Ra

tio

Figure 4: Food producer's P/E Ratios

AVI Clover ILLOVOPioneer Foods Tiger Brands TongaatOceana

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Shar

es

Figure 5: Over The Counter Shares

KAAP Agri Senwes Agri Voedsel

The Over-the-counter (OTC)

shares of Senwes and Agri

Voedsel remain unchanged

while KAAP Agri’s over the

counter shares decreased

during reporting month of

August.

Figure 4 shows that the

average P/E ratios for AVI,

Clover, Illovo, Tiger Brands,

Tongaat and Oceana decreased

during the reporting in the

month of August. The decrease

implies that the investors might

be expecting a low performance

in the future due to prospects of

higher interest rate and weak

economic environment. Pioneer

Foods P/E ratio increased.

Agri-Business INSIGHT August 2015

4

AGRI-BUSINESS DEVELOPMENTS

RCL Foods would obtain 33.5% stake of share capital from Hudani Manji Holdings which is

based in Uganda. RCL will pay R60 million in cash for the acquisition. Hudani Manji

Holdings operates a feed mill, broiler farms and processing plant. The partners will

integrate the plan with a main focus to improve the quality service in East African

Community and other regions. The company chose Uganda due to its strategic location and

favourable climatic conditions, which are conducive for poultry production. The company

will expand its international brand in the East African region. The poultry production might

be affected, since the US is still reviewing the conditions of Agoa in South Africa.

NWK profit (from continued operations) increased by 88% of R107.4 million in the year

ended 30 April 2015. The group experienced an increase in income across all segments

except for industries – which focuses on extraction of vegetable oils from sunflower and

maize germ, refine and package vegetable oils and manufacture animal feed and maize

and wheat products. The grain and trade segments performed well, contributing R114

million and R60 million respectively towards profit. The poultry segment’s profit is at R21.4

million despite market instabilities. Group revenue increased to R2 485 million, up by 1%

from previous financial year. The outlook for the current year will be affected significantly

by drought which will affect the service areas of the group. It will also affect the financial

services segment as repayment ability of clients affected by drought will be negative or

marginal. The poultry segment will also come under pressure due to increase in maize

prices affecting inputs and increased imports.

Clover headline earning increased from 64.2% to 74.2% for the year to June, which is

about 65.9c to 76.2c higher than 102.7c compared to last year. Clover earlier estimated that

the earnings per share would increase by 20%, however the company has recently

projected earnings per share to be 81.3% to 91.3% higher. The growth performance will be

resulted from the selling price of most categories, despite loss of sales volume and market

share. Clover is due to report the final financial results in September.

VKB agricultural limited bought the Kromdraai Best Milling, a wheat processing plant in

Franksort as part of investment in the value chain. This forms part of the group’s strategic

vision to invest in the value chain, improving on its existing package which includes a soya

bean press, poultry division and maize mills producing products. The VKB group is hopeful

this will stimulate wheat production in the region. The company will diverse through the

injection, grain procurement and accessing the market. The joint venture will increase the

demand, market participation and competition.

Mondi Group reported an increase in overall operating profit of R6.8 billion for the six

months ended June. . The group growth revenue of about 10% was achieved as result of

higher sales volumes, prices, and acquisition and currency effects. Selling prices increased

to 3% for virgin containerboard and Kraft paper, sold mostly in Russia and South Africa.

The 31% increase in the underlying earnings per share was realised. The energy costs

were lower due to the decline in prices of oil, coal and gas and through energy investment

done in the year before. The company also benefited from lower wood costs in Europe. In

South Africa, the power outages affected operations, demand slowed. Despite this the

division achieved R959 million, boosted by exports and a weak Rand.

Agri-Business INSIGHT August 2015

5

Further enquiries: Lebogang BOLOKA | LBoloka@landbank.co.za | 012 686 0973

Editor: Malope MAHLANGU | msmahlangu@landbank.co.za | 012 686 0967

Reviewer: Maine MOFOKENG | mjomofokeng@landbank.co.za | 012 686 0963

Distributor: Babalwa NKUMBESI | bnkumbesi@landbank.co.za | 012 686 0974

Sources: Business Day

Business Report

JSE

SAFEX

NWK Limited

Mondi Group

VKB Agricultural limited

Clover

RCL Foods

Other Insights by Land Bank:

AgriBusiness INSIGHT

AgriCommodity INSIGHT

AgriInput INSIGHT

Inflation INSIGHT

e-NSIGHT

Policy INSIGHT

For more information contact The Information Resource Centre (IRC) at bnkumbesi@landbank.co.zaor 0126860974. Although every care is taken in the compilation of this publication to ensure the correctness, completeness, quality and reliability thereof, the Land Bank does not accept any liability for any act, omission, loss, damage, the consequences thereof or any claim

whatsoever caused, whether directly or indirectly, by the reliance of any person on the information provided in this report. © 2015 Land Bank.