JSE-listed Kaap Agri has reported improved interim financial results as its ongoing retail and fuel diversification strategy has helped to lessen the impact of the Western Cape’s drought on the agricultural sector.

The company increased revenue by 5.4% to R3.4-billion in the six months ended March 31, 2018, with a like-for-like comparable sales growth of 2.9%.

The growth in the value of business transacted was driven mainly by a 17.1% increase in the number of transactions. Product inflation is estimated at 3.7%.

Recurring headline earnings a share increased by 7.2% to 223.12c, while headline earnings a share grew by 7.7%.

The largest impact on revenue was experienced in Wesgraan and the affected trade regions where sales have been constrained. Wesgraan, which includes grain handling and storage of grain and related products, seed processing and potato seed marketing, experienced a 29.9% decrease in revenue off the back of the drought-related reduced harvests in the Western Cape, resulting in a 24.6% reduction in operating profit before tax.

Revenue from the trading division, which includes the Agrimark retail branches, Pakmark packaging material distribution centres, mechanisation services and spare parts increased by 8.3%, with operating profit before tax increasing by 14.5%.

Significant growth was realised in The Fuel Company, with revenue from owned and managed sites growing by 26% and operating profit before tax increasing by 6%.

Irrigation manufacturing increased revenue by 6.6%. Operating profit before tax grew by 59.2% owing to operational and manufacturing improvements, as well as foreign exchange strengthening.

The corporate division cost, which includes the cost of support services, as well as other costs not allocated to specific segments, has reduced marginally from last year.

Treasury income, which represents the net internal interest received less interest paid, decreased because of the increased net debt position.

Despite the challenging trading environment, investment into expansions, upgrades and acquisitions continued resulting in a R86.5-million increase in property, plant and equipment since the previous financial year-end.

Net interest-bearing borrowings increased by 25.3% to R1.2-billion year-on-year off the back of investments into expansions, upgrades and acquisitions, as well as working capital.

“Although the current year remains challenging, our growth strategies are firmly on track to deliver superior returns in line with our strategic medium-term plans and we remain optimistic that the coming agricultural season should improve,” the company stated.

A gross interim dividend of 32c a share was declared by the board from income reserves, which represents an 8.8% increase on the previous interim dividend.