The Capespan Group has announced strong results for 2013 on the back of increased volumes and real price increases in its main markets.
This reflects a general trend in the South African fruit sector which saw good returns on the back of strong markets, a decline in the value of the rand and record export volumes in the stonefruit, table grape, apple and pear, and citrus sectors.
Turnover increased by 27.5 per cent from R5.6bn in 2012 to R7.1bn in 2013. Operating profit increased 34.1 per cent from R126.6m in 2012 to R169.8m in 2013. Headline earnings were 32.3 per cent higher at R115.4m, while headline earnings per share increased by 32.3 per cent.
As a result, the Capespan Group will increase its dividend per share by 45 per cent from 10 cents per share to a final dividend of 14.5 cents per share.
The Group, however, noted that the overall gross profit percentage of the group had declined from 14.8 per cent to 13.3 per cent. Operating costs increased by 11.1 per cent – above the inflation rate in South Africa – mainly the result of the weaker South African Rand.
Currency devaluation
Capespan pointed out that its international entities made up approximately 44 per cent of its operating costs and these (costs) increased when converted into South African Rand, due to the devaluation of the local currency during the year.
“The balance sheet has not changed in nature from the previous year with only normal movements arising from operational activities and the depreciation of the Rand,' a group statement read. 'The Group is cash positive and combined with existing capital facilities it has substantial opportunities to accelerate and fund its expansionary programmes.'
Capespan noted that it had a global marketing reach and was well positioned to leverage its existing international platform to procure fruit globally and efficiently supply the majority of international consumer markets.
“A new strategy is being implemented and it aims to give both growers and customers better access and improved service throughout the global Group with a strategic focus on customer needs. A more open and transparent business model between Group entities and direct supply from source to customers should result in improved efficiencies within the supply chain and greater levels of customer satisfaction.
“The early signs are positive as the Fruit Division performed very well with total Group volumes increasing for the first time since 2007, both from South Africa and other international sources,' the statement continued. 'Volumes increased by 5.5 per cent when compared to the previous year to a total of 46m cartons, of which more than 44 per cent is already procured from outside South Africa.”
The group said that the majority of its international marketing entities benefited from the bumper crop in the South African apple and pear industry, while the country's citrus crop also supported strong results. “Improved availability combined with good citrus grower returns during the previous year, enabled Capespan to grow its citrus volumes by 14.1 per cent.”
Citrus Black Spot
Clear evidence that the whole issue of dealing with citrus black spot (CBS) – as far as the European Union is concerned – is costly and disruptive to the South African industry, is also reflected in the Capespan Group’s report for 2013.
“The effects of restrictions and new protocols imposed due to citrus black spot had a negative impact on the industry as a whole,” Capespan said.
It has previously been reported that losses due to the disruption caused by interventions due to CBS has cost the South African citrus industry at least R500m.
In its report Capespan revealed it had to overcome some real challenges related to CBS, but managed to achieve a competitive outcome. “Thorough (our) global reach, Capespan successfully diverted fruit to other markets even at very late stages. Grower returns, however, were negatively affected as a result.”
Referring to its international procurement programme, Capespan said that volumes of fruit procured from international supply countries grew as the Group increased supplies from Chile, Mexico, Peru, India and Morocco, to name but a few.
“Market penetration also increased with encouraging growth in a number of major retail accounts,' the statement read.
In trade in the Far East the Capespan Group noted that its investment in Golden Wing Mau (GWM), a leading fruit wholesaler in China, had continued to deliver strong results.
“The GWM Group is well positioned to capitalise on improved market penetration in China as the high growth in formal retail is expected to continue for quite some time. GWM increased its number of distribution centres to 34 within the major cities across China to ensure optimal distribution as the projected increases in consumption of fresh produce should result in increased sales in the years to come.”
It says bullish forecasts are made on the back of continued growth in GDP per capita in China.
Logistics
As far as its logistics operations are concerned, which have reportedly been going through some difficult times recently as the Group adjusted to the increase of containerisation, Capespan explained that there had been a significant turnaround.
The Logistical Division experienced a significant turnaround from the previous year within its South African port-based operations, FPT, and also recorded strong results from its Mozambique operations (MCT).
“An internal re-organisation has been completed and the majority of duplicate costs have been removed as synergistic parts have been rationalised and consolidated. A further business process of redesign and optimisation is currently under implementation at Durban.”
Capespan said that during the year FPT produced strong results through volume growth in fruit of 24 per cent, mainly in Durban, as well as in its break-bulk operations, which grew by 136 per cent.
The Port of Durban has generally been criticised for operating efficiencies during the past few seasons. However, Capespan noted that its Durban terminal performed extremely well despite operating circumstances being under pressure. In Cape Town fruit volumes continued to decline, while container volumes recovered to normal levels which resulted in improved results.
“However,' the report continued, “the Cape Town terminal remains in a loss position. Management hopes to finally address this particular problem during next year.”
In Mozambique, the operations at MCT have been expanded with the commissioning of a mineral terminal. MCT, together with consortium partners, were successful in being awarded the tender for the development and operation of the new customs clearing terminal just outside the Ressano Garsia border. These operations are currently managed within MCT at Matola (in Maputu) and will be relocated to the new site during next year.
