THE PERFORMANCE
REPORT BY THE CHIEF FINANCIAL OFFICER| continued
SIMPLIFIED STATEMENT OF FINANCIAL POSITION
2019
R’m 2018
R’m
Property, plant & equipment 715 567
Investment in JV’s and Associate 255 292
ASSETS
Operating capital
Inventory
609 995
52 53
4 085 3 907
- Long term 1 204 1 079
- Short term 2 881 2 828
Derivative financial instruments
Debtors and receivable loans
Agency inventory
234 144
Cash 31 -
Other 79 172
6 060 6 130
TOTAL ASSETS
EQUITY AND LIABILITIES
Shareholders’ interest 2 363 2 179
Long-term debt 1 002 1 002
Short-term debt 2 588 2 900
107 49
6 060 6 130
Other
TOTAL LIABILITIES
NAV
Own Capital Ratio
ROE
7,7% R14,05/s R13,04/s
3,5% 39,0% 35,5%
(2,7%) 13,0% 15,7%
WHERE WE INVEST/CAPITAL ALLOCATION
Capital is mainly allocated to capital projects, credit facilities to producers,
machinery and retail stock, as well as working capital on the expansion into
new markets. Material movements can be explained as follows:
➊ The movement includes additions of R210 million, which were mainly
spent on the upgrading of the silo infrastructure and new IT WAN infra-
structure, together with new processing capacity in the data centre.
➋ Decrease of R386 million, which mostly relates to the liquidation of slow
moving whole goods inventory and more conservative planning with re-
gards to stock ordering.
➌ Increase in debtors book of 4,6%, mainly due to higher summer production
credit and more hectares financed.
➍ Loans to joint ventures decreased by 54,1%, mainly due to the loan made
by Senwes to its joint venture retail business, Hinterland, a significant part
of which had been repaid.
HOW WE FUND
Equity increased by R184 million, while long and short-term loans reduced
by R254 million. This can be explained as follows:
➊ Short-term interest-bearing debt decreased by 10,8% mainly due to the
decrease in inventory. Unutilised short-term facility of R1,3 billion ensures
adequate liquidity for growth opportunities and unexpected transactions.
Interest-free creditors decreased by R61 million and followed the same
pattern as inventory.
➋ AgriRewards and deferred tax increased, mainly due to a year-on-year
cumulative growth, higher AgriRewards provision and a higher PPE car-
rying value.
➌ The increase in PPE is mainly funded by the growth in equity.
agri-sector volatility. Senwes remains fully committed to the indus-
try and will continue to appropriately position itself during difficult
times to ensure long-term sustainability. We also continuously
strive to derisk the risk profile of Senwes through our strategic ini-
tiatives, which include:
• Diversification of the business;
• Increased investments in efficiencies in the value chain;
• Active management of interest-bearing mechanisation stock;
• Management of interest costs;
• Continuous management of bank covenants;
• Management of debtors book.
SENWES RISK APPETITE VERSUS RISK TOLERANCE
600
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150
100
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Risk Limit - High End
Residual Risk Tolerance of Equity
Risk Limit - Low End
Residual Risk
SENSITIVITY ANALYSIS – EXPOSURE FOR FY 2020
Given the environment in which we operate and the current agricultural conditions, we are subject to several variable factors beyond manage-
ment’s control. The analysis below provides some insight into these factors and their potential impact going forward (market risk without any
reaction plans).
MAXIMUM REALISTIC EXPOSURE FOR THE FY 2020 (NAV CENTS PER SHARE)
22
Backwardation
RESIDUAL RISK PERFORMANCE AGAINST TARGETS
Residual risk increased on the back of an average crop during 2017/18
and consecutive years of below-average maize hectares planted. The
resultant effects included a smaller market size, impacting particularly
the input supply pillar, increased pressure on the debtors book, market
volatility and declining closing stock levels.
An assessment of the residual risk performance against respective tar-
gets of the past seven years, reflects two specific trends:
The first trend is the unpredictability of the agricultural sector –
national maize production varied from a low of 7,8 million tonnes
in 2015/16 to a high of 16,8 million tonnes the following year in
48
20
Below-average hectares planted
RISK ASSESSMENT AND SENSITIVITY ANALYSIS
18
Higher debt in arrears
2016/17. Residual risk increased to above the high-risk limits for
the first time during the low production period referred to. Compre-
hensive and prudent action plans were and continue to be investi-
gated and implemented, leading up to and during such risk events.
This resulted in the residual risk declining to within tolerance levels
quicker than anticipated at first during 2017. It is this attitude to-
wards actively managing risk that the current residual risk levels are
still within risk tolerance levels, given consecutive years of below
average hectares planted and the 4th lowest maize production es-
timate since 2007/08.
The second trend is the increased risk tolerance levels – we
continue to increase risk tolerance levels, even during periods of
SENWES INTEGRATED REPORT 2019
17
Late plantings
17
Lower grain receipts
13
Change in rand/dollar exchange rate
11
Higher equipment paid stock levels
Lower closing stock levels 10
Equipment market size decline 10
The primary NAV detractors would come in the market access pil-
lar and financial services pillar, mainly due to the input supply pillar
coming from a lower base. The current prevailing agricultural funda-
mentals will continue to have an impact on the market access and
financial services pillar, while the input supply pillar could have an
improved second half of the new year, should the winter crop area
planted increase and should summer crop hectares planted, return
to normal levels.
However, farmer profitability remains under pressure, due to in-
creased debt levels, drought impacting the area planted and yields,
with the resultant effects of limited production output growth.
SENWES INTEGRATED REPORT 2019
49