KAL Group reports 68.4% jump in half-year revenue

KAL Group, a leading company in the retail and service station industry, has reported a significant jump in half-year revenue. However, the CEO, Sean Walsh, reveals that this growth has been dampened by the ongoing challenges posed by load shedding and rising input costs affecting the farming sector. In an exclusive interview with CNBC Africa's Godfrey Mutizwa, Walsh sheds light on the impact of these challenges on the company's margins and overall business operations. The conversation delved into the direct and indirect effects of load shedding on KAL Group. Walsh highlighted that while the operational costs have increased due to load shedding, the larger impact arises from the loss of sales as farming communities, under pressure from load shedding costs, reduce their expenditure in stores. This led to a 27% growth potential in recurring headline earnings being reduced to 18% due to load shedding implications. The severity of the situation is echoed by industry players such as Gareth Hakkerman, chairman of Pick and Pay, who described the challenges facing food producers as an 'existential crisis'. Walsh emphasized that farmers are currently facing unprecedented difficulties, with rising fertilizer and chemical prices, port challenges, and now, the additional burden of load shedding, pushing them into dire circumstances. Walsh also discussed the impact of the acquisition of PEG fuel on the company's revenue, highlighting a doubling in revenues following the integration of the retail service stations. Looking ahead, KAL Group plans to strategically expand its footprint in different channels while focusing on growth and consolidation post-acquisition. Addressing the need for government intervention, Walsh acknowledged the lack of short-term solutions to the ongoing crisis. In response, KAL Group is curbing operational expenditures, redirecting capital expenditure towards alternative energy solutions, and adapting to the challenging economic environment. Furthermore, Walsh shared insights on the implications of high input costs and curtailed capacity expansion within the farming sector. He revealed that farmers have reduced spending with KAL Group by millions due to increased costs related to load shedding and generator expenses. This has forced the company to make adjustments and cut costs to navigate the challenging landscape. In conclusion, Sean Walsh expressed the interconnectedness of the economy, emphasizing that when those supplying food face hardships, the entire country's economic stability is at risk. Despite the challenges, KAL Group remains committed to weathering the storm and adapting to the prevailing conditions in order to sustain its operations and support the economy.