Company Announcement - With two consecutive years of drought fresh in the memory, the outlook for the past grain season was anything but rosy, but the favourable production conditions that eventually materialised have turned the tables and led to the second largest South African maize crop ever. This resilience of agriculture is also clearly reflected in Senwes's first six month results for the 2015 financial year. “The expected road to recovery would take two to three seasons but the decline was reversed in one season. An increase of 41% in normalised headline earnings for the period ended 31 October 2014 indicates that the recovery happened quickly and robustly and how unpredictable and volatile agriculture can be,” commented Francois Strydom, managing director of Senwes.

Senwes’ turnover increased by 5,5% to R5,3 billion and the gross profit returned to R579 million from R499 million at the end of October last year. A net profit after tax of R114 million was achieved for the six months ended 31 October 2014, which is 34,5% lower than the corresponding period. Included in the previous year’s profit of R174 million, is a profit to the value of R118 million from the retail business joint venture formed with AFGRI. The balance sheet was turned much faster and return ratios increased as a result. Cash flow of R294 million was generated from operations and R23 million was ploughed back into capital projects. The net asset value per share also increased from R9,58 per share on 30 April 2014 to R10,06 per share at the end of October 2014, even after the payment of a final dividend of 22 cents per share during September 2014.

OVERVIEW ON BUSINESS SEGMENTS
Market access
Grain received through the silo network of Senwes increased by 74,8%, despite the negative impact of low carry-over stock. Soft commodity prices responded to the increased volumes and crops were liquidated at an average of 25% lower than the previous year. A large national maize closing stock situation is foreseen, which will give momentum to the business unit, even in the second semester of a financial year characterised by lower profitability.

Input channel
The 2014/2015 planting season is late and a lot of uncertainty prevailed for a large portion of the first six months of the Senwes financial year regarding new season plantings, given relatively low commodity price levels and the late rain. Despite this, turnover was 11,2% higher than the previous year and gross profit improved by R29,7 million, which indicates that Hinterland, the joint retail venture with AFGRI, is in the process of successfully rolling out its business model.

Financial services
The credit book proved its repayment ability over time, but greater volatility and extremes occurred during the season. The book is well secured and outstanding 2014 summer production debt amounted to 8,4% (2013: 10,7%) at 31 October. Applications for the new season are well under way, but deferred payment arrangements of input suppliers could impact on the taking up of credit and could result in pressure on financing margins.

STRATEGIC OVERVIEW
Senwes is still following its roadmap to 2020 and is constantly evaluating which actions and investments are lending impetus to the growth strategy.

The African businesses were restructured during the period under review and cross-border transactions will be facilitated from Senwes in future. An attempted consolidation between Senwes’s holding company, Senwesbel, and NWK Holdings was not approved by the relevant shareholder corps and Senwes will continue with consolidation and operational co-operation discussions with all relevant parties.

Senwes is satisfied with the partnerships in Hinterland; Certisure; Grasland; JD Implements; Senwes Asset Finance, Grainovation; ESC and TradeVantage. Prodist is not rendering acceptable results as yet, but has already gained market share. Drastically improved strategic positioning and financial results are expected by the next season.

The market is still highly fragmented and integrated to a limited extent and participants are increasingly experiencing challenges to remain relevant against international conglomerates.  Consolidation, reorganisation and specialisation remain our counter-measures against these challenges. The establishment of a co-operation vehicle by which to compete on a national basis will bring essential critical mass and will increase the ability to ensure sustainability.  New markets which will decrease risk will also be investigated further.

DIVIDENDS
An interim dividend of 24 cents per share (2013: 26 cents per share) was declared to all shareholders registered on the register on 8 December and will be paid on 12 December 2014.