Drought impacts Agra

Close to 80% of producers had to sell up to 50% of their stock because of the prevailing drought conditions.

11 December 2019 | Agriculture

A relative stagnant gross profit, paired with increasing costs, resulted in total comprehensive income for the Agra group decreasing to N$24.4 million for the 2018/19 financial year, which is a decline of 24.2% when compared to the N$32.2 million recorded during the 2017/18 fiscal year.

This was shared during Agra's recently held annual general meeting (AGM) in Windhoek. Agra board chairperson Ryno van der Merwe gave an overview of the agricultural sector and spoke about the prevailing drought, which he said can be backdated to 2013, and the economic recession in Namibia that has negatively impacted the agricultural sector.

“Close to 80% of producers had to sell up to 50% of their stock. Despite the challenging year, Agra has managed to adapt and the board believes that Agra's financial performance is commendable,” Van der Merwe said.

Agra CEO Arnold Klein gave an overview of the financial year ended July 2019.

He also shared the company's strategy, aimed at cost-cutting, consolidating debt and attempting to obtain more preferential interest rates, while also focusing on stock management and control.

The company has also diversified its product range to cater to non-farming clients, thus catering for a broader market to ensure that it remains sustainable during these trying times. Given the current economic conditions and one of the worst droughts in recent history, Agra still maintains that although profits decreased from the previous year, the company is appreciative of the positive results.

Agra reported positive growth in market share in most categories and continued efforts to further diversify their product range and services, which resulted in revenue for the group increasing from N$1.551 million to N$1.734 million in 2018/19, representing an increase of 11.8%.

According to Agra, this unfortunately did not transcend directly into the same increase in gross profit, as gross profit for the group came under pressure due to an increase in the proportion of low margin product sales, such as animal feed products. “A marginal increase in gross profit of 0.5% from N$356 million to N$358 million in 2018/19 was achieved.”

According to Agra, the reduction in commission received by the auction division of N$10.3 million, mainly due to a decrease in the price per head, despite the increased number of animals auctioned, also contributed to the marginal increase in gross profit recorded.

The operating expenses for the group increased from N$287.9 million to N$304.7 million in 2018/19, an inflationary related hike of 5.8%.

The finance costs of the group decreased from N$30.5 million in 2017/18 to N$29.8 million in 2018/19, a decrease of 2.3%, which is largely as a result of the decrease in the prime lending rate and the repayment of long-term debt, Agra said.

It said the relative stagnant gross profit, paired with increasing costs, resulted in total comprehensive income for the group decreasing from N$32.2 million in the previous year to N$24.4 million for the year under review, which is a decline of 24.2%.

“Although alarming, this is being monitored very closely and strategies to curb costs, as well as to boost revenue, are being implemented.”

STAFF REPORTER

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