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, compared with revenue of R3.74-billion achieved in the six months ended February 28, 2021.

Profit after tax increased by 175.5% to R246.65-million, compared with R89.53-million in the prior comparable period.

“TWK’s overall results for the first six months are reflective of the quality of the underlying business and the group’s ability to adapt to an ever-changing environment. General trading conditions improved, which resulted in an increase of sales and net profit in especially the timber, retail and mechanisation segments,” it said on April 12.

Further, even though there was a decrease in mining timber sales, the export market for woodchips increased dramatically, resulting in an increase of 47% in total timber sales volumes, the company said.

“The diversity of TWK’s income streams provides resilience amid the economic uncertainty, disruptions in trade networks and infrastructure challenges, as well as the ongoing impact of the Covid-19 pandemic,” said TWK MD André Myburgh.

“Significant contributors to these excellent results came from an increased demand and sales to key timber markets, especially an increase of 223% in woodchip export sales which was supported by the inclusion of the Peak Timber assets in the latter part of the previous financial year,” he said.

The group’s results were further strengthened by the increase in retail and mechanisation sales, with increased market share gains and the steep increase in fertiliser product prices owing to global shortages, he added.

Basic earnings a share increased by 127% to 565.77c, up from 249.27c in the prior comparable period, while the net asset value a share increased by 18.4% to R50.24, up from R42.42.

The purposeful effort to gain market share, strategic acquisitions and improvement in TWK’s markets resulted in an increase of 111.84% in earnings before interest, taxes, depreciation and amortisation to R428.9-million, up from the R202.5-million achieved during the interim period to the end of February 2021, the company said.

“The group’s financial position is solid, with [the value of] total assets having increased by 28.9% from R4.91-billion to R6.32-billion. Net cash is lower owing to an increase in Trade and Other Receivables, especially production accounts,” TWK FD Eddie Fivaz said.

“The group’s gearing was 156.09% at February 28, which is higher than the corresponding period owing to the increased on-lending production accounts, but still comfortably within the group’s norms,” he said.

The overall strong demand for woodchips from some of the largest pulp and paper producers in Japan, China and Spain is expected to be expanded to other European countries as a direct result of the Ukraine and Russia crisis.

International pulp is currently trading at high prices which is expected to continue for several months into this year. The Peak Plantations’ operations are in the process of being modernised, which in turn will result in increased profitability and cash generation, TWK said.

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

“The agricultural sector could experience margin pressures, with rising fuel and crop input costs, which will negatively impact the Retail and Mechanisation segment. However, these negative cost pressures could be countered by higher grain prices and the strengthening of the rand against the US dollar,” the company said.

“Management holds the view that the second half of the year will outperform the corresponding period during 2021 and, therefore, will substantially outperform the previous financial year’s results which ended on August 31, 2021,” said Myburgh.

The TWK Grain Storage and Grain Marketing divisions will also perform well on the back of good grain yield. However, the profitability of the maize meal division will remain under pressure owing to high grain prices.

“The growth in grain storage volumes was owing to strong crop yields which resulted in an increase in more tonnage grain stored contributing to the increase in profitability in the grain segment.”

The production credit book grew strongly by 48.8% mainly owing to higher grain plantings, higher input costs for farmers, as well as increased market penetration. This resulted in an increase in earnings in the financial services segment, the company said.

“It is expected that the 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 the effective syndicate lending agreement with Standard Bank, ABSA and FNB,” TWK said.

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

The motors and tyres segment reported an increase in revenue of 15.4% mainly as a result of increased vehicle sales and better profit margins as a result of having fewer units available to sell. The solid performance of the dealerships was offset by the poor performance of the tyres business and the filling stations.

Additionally, TWK’s Roofspace has signed lease contracts with another eight shopping centres during the period under review, totalling 12 malls at the end of February 2022. The growth from the renewable energy segment will increase exponentially as more solar projects are developed, the company added.