6
BUSINESS REVIEW
sufficient opportunity to spread grain into future months, without
the risk of shortages in respect of carry costs and base premiums.
This segment reflects a profit before tax of R152 million, which is
R95 million (166,7%) higher than the comparative period of the
previous year.
Input supply
The agri-equipment business unit, Senwes Equipment, is under pres-
sure. Regardless of the increased turnover, the gross profit decreased
by 15,1%. Low commodity prices, increased focus by the producer to
normalise debt levels and low business confidence in the new season
resulted in the clients’ acquisition of capital goods being postponed
to a more profitable season. Market share was maintained in the tra-
ditional area of operation and expanded in the Eastern Cape, due to
Senwes Equipment’s new John Deere agencies. Despite this, income
from the sale of new equipment is still under severe pressure. Other
divisions, such as Spares and Service, are performing well.
The sales of the retail and bulk distribution joint venture with Afgri,
Hinterland, are also under pressure due to lower customer spending,
especially in the rural areas, and uncertainty which the new season
brings with it. As a result of this, the uptake of new credit is slow
compared to previous years.
The management of slow-moving and obsolete stock in this segment
remains a focus area for management.
This segment reflects a profit before tax of R17 million, which is
45,2% lower than the comparative period of the previous year.
Financial services
The record crop and low maize prices had an impact on the credit
division since most customers were not adequately hedged against
price fluctuations and the larger crop did not counter the price
decreases in all cases.
Senwes Credit, through its sound relationship with its clients,
managed to limit arrears to 8% of the book, compared to 11% as at
31 October 2016. The growth of the book is expected to be subdued
due to the stressed situation of some clients, which is exacerbated
by a tightening of the lending criteria by financiers and a lack of
liquidity in respect of the purchase of farm land. The overall book,
however, is managed strictly and is well secured by prime security.
senwes interim results 31 october 2017