Johannesburg - Agricultural group Afgri remains committed to world-class, full-spectrum services to the agricultural
sector in South Africa and Africa, said chair David Daniel de Beer in
the group's annual report on Monday.
He said the group was positioning itself to benefit directly from the
food and agricultural value chain in which it operates.
"It is only the manufacture of primary agricultural inputs that the
Group does not wish to participate in," he pointed out.
"The remaining agricultural cycle of planting, growing, harvesting,
storage and trade of commodities dovetails with Afgri's various product
offerings of inputs, requisites, equipment, finance, storage and logistics
and commodity trading.
"A greater exposure to the foods sector of the economy will result in a
more balanced investment portfolio across the group," said De Beer.
He noted that Afgri did not envisage that it would be involved in direct
manufacturing and the end customer stages of the food and agricultural value
chain and therefore would focus on the "grain value-chain".
"It is within this chain that our Producer Services, Logistics, Foods
and Financial Services companies best operate," he said.
"By adopting this strategy Afgri reduces elements of risk and large
capital investment prior to the season. By remaining focused on the food
elements within this cycle it builds Afgri's core of agriculture and
diversifies the group," said De Beer.
He said the group was expecting that good rainfalls would continue in
its planting areas and as such there should be another good crop on the land
for farmers.
De Beer said from a strategic perspective, Afgri had spent a good part
of the year disposing of loss-making and non-core businesses within the
group in an effort to improve the capital position of the company.
"Internally the group has embarked on a number of strategic initiatives
and operational efficiency projects which will see the group focus on
organic growth in an effort to join together and operate as 'one Afgri',
benefit from implementations such as shared services and extract synergies
from the food and agricultural value chain," he said.
He noted that after three drought periods and low crop outputs the South
African maize farmers had experienced two successive good crops.
De Beer said the cycle of high input costs was beginning to turn and
large maize farmers, able to forward cover their prices, had been rewarded.
"On a macroeconomic level, farmers were affected by the global crisis
through limited credit lines and volatile exchange rates.
"In the year under review there has been little reprieve in terms of an
end to the global crisis, although a few market commentators talk of 'green
shoots' which are only expected to develop well into 2010."
De Beer said efforts to limit the impact of the deteriorating world
economy continue with the group's management aggressively controlling
working capital and adopting an extensive cost control programme.
The primary sector, in which it operates, together with its diverse
product offering, ensures that Afgri is well positioned to meet the
challenges posed by both the slowing local economy and the global financial
crisis, he said.
Looking ahead, De Beer said the outlook for South African winter crops
currently being planted and the summer crop that will be planted from
September to December 2009, was encouraging based on the late winter rains.
"Current market prices do not provide sufficient incentive to increase
wheat plantings, however a reduction in the major input costs such as fuel
and fertiliser, may encourage maize producers to plant for the coming
season."
He also noted that availability of finance would also play a role with
regard to the area to be planted, as the current economic environment forces
financiers to impose much stricter limits on lending.
De Beer further pointed out that biofuels remained an international and
local topic.
"Declining oil prices of late have negatively impacted bio-ethanol
projects in South Africa and production in South Africa is still primarily
sourced from sugar cane," he said.
- I-Net Bridge