TWK raises interim profit to R247m

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Diversified agriculture and forestry company TWK Investments achieved a 30.6% increase in revenue to R4.88 billion for the six months ended February 28, from revenue of R3.74 billion in the during the semester ended February 28, 2021.

Profit after tax increased by 175.5% to R246.65 million from R89.53 million in the prior comparable period.

“TWK’s overall results for the first six months reflect the quality of the underlying business and the group’s ability to adapt to an ever-changing environment. General trading conditions have improved, resulting in increased sales and net profit, especially in the timber, retail and mechanization segments,” he said on April 12.

Additionally, even though there has been a decrease in mining timber sales, the export market for woodchips has increased dramatically, resulting in a 47% increase in total timber sales volume, the company said.

“TWK’s diverse revenue streams provide resilience in the face of economic uncertainty, business network disruptions and infrastructure issues, as well as the continued impact of the Covid-19 pandemic,” said TWK MD. Andre Myburgh.

“The main contributors to these excellent results came from increased demand and sales in key wood markets, in particular a 223% increase in wood chip export sales, which was supported by the inclusion of Peak Timber assets in the latter part of the prior year,” he said.

The group’s results were further boosted by increased retail sales and mechanization, with increased market share gains and the sharp rise in fertilizer prices due to global shortages, he added.

Basic earnings per share increased by 127% to 565.77c, compared to 249.27c in the previous comparable period, while the net asset value per share increased by 18.4% to 50.24 rand, against 42.42 rand.

The deliberate effort to gain market share, strategic acquisitions and improved markets for TWK resulted in an increase of 111.84% in earnings before interest, taxes, depreciation and amortization to R428.9 million, compared to R202.5 million in the interim period to the end of February 2021, the company said.

“The group’s financial situation is solid, with [the value of] total assets increased by 28.9% from R4.91 billion to R6.32 billion. Net cash is lower due to an increase in trade and other receivables, particularly production accounts”, TWK FD Eddie Fivaz mentioned.

“The group’s indebtedness was 156.09% as of February 28, which is higher than the corresponding period due to the increase in retroceded production accounts, but remains comfortably within the group’s standards,” he said. he declares.

Strong overall wood chip demand from some of the largest pulp and paper producers in Japan, China and Spain is expected to spread to other European countries as a direct result of the crisis in Ukraine and Russia.

International pulp is currently trading at high prices which are expected to continue for several months this year. Peak Plantations’ operations are being modernized, which will lead to increased profitability and cash generation, TWK said.

Additionally, retail conditions are expected to be uncertain given the Ukraine crisis.

“The agricultural sector may come under pressure on margins, with rising fuel and agricultural input costs, which will have a negative impact on the retail and mechanization segment. However, these negative pressures on the costs could be countered by higher grain prices and the strengthening of the rand against the US dollar,” the company said.

“Management believes that the second half of the year will outperform the corresponding period in 2021 and, therefore, will significantly outperform the results for the prior year which ended August 31, 2021,” Myburgh said.

The TWK Grain Storage and Grain Marketing divisions will also show good results thanks to a good grain yield. However, the cornmeal division’s profitability will remain under pressure due to high grain prices.

“The growth in grain storage volumes was due to high crop yields, which resulted in an increase in the tonnage of stored grain, contributing to the increase in the profitability of the grain segment.”

The production credit portfolio grew strongly by 48.8%, mainly due to increased cereal plantings, higher input costs for farmers, as well as increased market penetration. This led to higher profits in the financial services segment, the company said.

“The financial services segment is expected to perform better in the second half of the year, primarily due to better business conditions, inflation and new customer acquisition through the effective syndicated loan agreement with Standard Bank, ABSA and FNB,” says TWK.

Meanwhile, the sale of loss-making fuel sites in the coming months will support the profitability of the engine and tire segment, TWK said.

The Engines and Tires segment recorded a 15.4% increase in revenue primarily due to higher vehicle sales and better profit margins due to a decrease in the number of units available for sale . The good performance of the dealerships was offset by the poor performance of the tire business and service stations.

In addition, TWK’s Roofspace has signed lease agreements with eight other shopping centers during the reporting period, totaling 12 shopping centers at the end of February 2022. The growth of the renewable energy segment will increase exponentially as more solar projects are developed, the company added.

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