STRATEGIC AND OPERATING CONTEXT
REFLECTIONS FROM
THE CHIEF EXECUTIVE
OFFICER
FRANCOIS STRYDOM, SENWES CEO
What is our role?
The Senwes group celebrates its 110th birthday in 2019 and
pays its respects to all its customers, board members, input
suppliers, staff, advisors, partners and communities that it has
interacted with over the years.
In the financial year under discussion, South African food and fibre
value chains were repeatedly challenged by aspects such as the
decay of our national infrastructure, the collapse of state owned
entities, entrenched corruption at all levels of national, provincial
and local government, specific political neglect of our sector, a
severely strained consumer market and extreme weather condi-
tions.
Despite these aspects, the resilience of our food value chain
role-players was once again evident and emphasised their worth
to the bigger South African economy.
South Africa produces 34 main soft commodities on a significant
scale and 20 of those commodities have proved over time to be
financially sustainable net exporters and therefore earn significant
foreign currency, create jobs locally and provide safe, secure and
affordable food and fibre to South Africa.
The Senwes group recognises its role in the stabilisation of the ru-
ral economy, while the increasing urbanisation of our population
places greater demand on food and fibre supply.
The Senwes group plays its part in ensuring international com-
petitiveness, whilst contributing to the national economy.
What do we understand when we
talk strategy?
The customer will always remain the most prominent part of our
strategy and business model.
The ability of the Senwes group to do this, is not determined by
volumes, but rather by the extent to which it offers solutions to
the businesses of our customers.
36
The Senwes group's strategy involves a close and concentrated focus
on its particular role as a player within value chains and is executed
by its business model in the input supply channel, the market access
channel and the financial services channel.
Diversification, in our strategic terms, involves differentiated commodi
ties, geography, client base and brands. It is supported and distin-
guished by exceptional technical corporate services and is further
backed by investments in our extensive asset base across eight of
the nine provinces of South Africa. These investments aim to directly
benefit our customer base through value-creating solutions.
The integration of the various business units and joint ventures within
our portfolio means, in practical terms, that we know our customer,
prioritise his needs and develop a competitive understanding of his
business.
In an ever-changing environment and the development of our highly
competitive industry, we strategically consider the following three main
aspects:
I. Does this create value and solutions for our client base?
II. Does this create capacity and/or a deeper and better understan
ding of the specific business unit, joint venture or the group?
III. Does this add to and enhance the Senwes cultural fit, which is at
the heart of everything we do?
The “cultural fit” of the Senwes group can be described as follows:
Disciplined and functional clarity of our business structures and
roles.
Improving our analytical ability to assist our decision-making pro-
cess.
Excellence in our support functions to drive efficiency, control and
quality of income.
Improving the personal ownership and stewardship at all business
levels and areas of operation.
Driving and improving the integration between businesses within
the portfolio.
What happened in our operations?
The challenging environment in both our country and sector, provides
context to our operational results.
SENWES INTEGRATED REPORT 2019
We were able to achieve a full year result of:
% Var 2019 2018
Operational profit (R’m) -8,3% 605 660
EBIT (R’m) -6,7% 611 655
PAT (R’m) -9,0% 283 311
Headline earnings (R’m) -9,2% 295 327
ROE (%) -2,7% 13,0% 15,7%
Dividend yield (%) +0,3% 5,5% 5,2%
Own capital ratio (%) +3,5% 39,0% 35,5%
The year, in a nutshell, reflects the following trends:
Input Supply Channel 150,8%
The commodity price cycle is still under pressure and reflects on pri-
mary producers’ profitability and consequently on all businesses within
this channel. Volumes, margins and higher stock levels affected the
operational results and increased the levels of competitiveness, while
the severe drought conditions in the early season, placed further pres-
sure on this channel. However, better balance sheet management
together with the integration of the wholesale and retail businesses,
turned this pillar around with a R89 million better result than the pre-
vious year.
Market Access Channel
27,2%
The previous financial year recorded a national maize harvest in excess
of 16,8 million tonnes, which was followed this financial year by a much
smaller harvest of 12,5 million tonnes, but still provided adequate vo
lumes to enhance the income streams of business units in this channel.
The operational result therefore decreased by 27,2% to R300 million,
resulting in an unsatisfactory quality of income. Functional restructuring
of business units is underway to address these issues.
Financial Services Channel 5,0%
The land debate affected business confidence and investments and
had a definite effect on business within this channel. The lower profit -
ability of role-players in the food value chain, which represents our
client base, led to cash flow restrictions and pressure on balance
sheet capacity. An additional R11,9 million provision was made to ad-
dress current cash flow realities.
The group performed well under the present conditions because of its
focused approach to the food value chain, its client-centric approach
and highly motivated staff complement. This segment contributed
R168 million operational profit to the group results.
SENWES INTEGRATED REPORT 2019
37