Diversified agricultural company TWK says the diversity of its income streams has provided resilience amid the Covid-19 pandemic, resulting in the company posting a 41% year-on-year increase in profit after tax to R90-million for the six months ended February 28.

CEO André Myburgh points out that noteworthy contributors to the improved results came from the Sawmills, BedRock Mining Timber, Sunshine Seedlings, General Trade and the Fertilizer divisions.

“With the careful management of working capital and cost-saving initiatives, TWK has been able to focus on its vision of achieving sustainable growth, together with the aim of creating value for all stakeholders by creating a more resilient business with more sustainable quality of earnings,” he says.

TWK reported a 44% year-on-year increase in earnings a share to 242.67c. The company generated 12% more cash, at R194-million for the six months under review, while its net asset value per share increased to R46.52, compared with R41.28 reported in the prior comparable six months.

TWK is headquartered in Mpumalanga, and operates across South Africa, in the timber, retail and mechanisation, grain, financial services, and vehicles and tyres segments.

CFO Eddie Fivaz says the company’s total assets increased slightly in the period under review, owing to an asset for share transaction, capital expenditure and increase in trade and other receivables. TWK’s results were further positively impacted on by an increase in General Trade sales volumes and margin improvement.

“The purposeful effort to reduce working capital, the effective financing model as well as the decline in interest rates, resulted in a decrease of R26.22-million in finance costs. This, together with cost-saving initiatives across the majority of operations, resulted in an increase of 45.1% in profit after finance costs to R127.38-million,” he notes.

Looking ahead to the remainder of the financial year ending August 31, TWK says pulp prices have increased by 50% to 60% in the last four months, the fastest cycle recovery on record. European pulp inventories are the lowest since 2018 and now back to normal. There is an increased demand for our woodchip exports, treated timber and timber to the mining industry.

The addition of Peak Timbers will benefit the operations of the company’s Sunshine Seedlings Services business. The sale of the loss-making fuel sites in the coming months will support profitability.

“We expect General Trade sales to be on the same levels as before Covid-19, owing to record high grain yields. The Grain segment will also perform well on the back of the good grain yield.

“The profitability of the Grain segment will, however, remain under pressure as long as high grain prices and consumer constraints persist,” Myburgh states.

It is expected that TWK’s Financial Services segment will perform better during the second half of the financial year mainly because of better trading conditions, inflation and gaining new clients on the back of an effective syndicate lending agreement.

The bargain purchase of Peak Timbers undertaken by the company will likely add about R172-million to profit before tax.

“Management holds the view that the second half of the year will be better than the period ended on February 28 and therefore will substantially outperform the previous year’s results,” concludes Myburgh

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