Zeder's Strategic Disposals Aim to Boost Shareholder Value Amid Challenging Agricultural Environment

Zeder swinging into an interim loss of 4.1 cents per share, citing adjustments to the valuations of its unlisted assets. The agriculture-focused investment group opted not to pay an interim dividend but said it would consider paying a special dividend as proceeds from disposals are received. I'm joined by Johann Le Roux, CEO, Zeder for more. Thanks so much for your time. So, quite a number of moving parts in these numbers this time around. You're talking about adjustments to certain assets. You've also got a couple of disposals on the go. So, how should investors read your interim performance? Thank you, Fifi. Yes, I think we've been on a journey, a strategic journey over the past few years where we're trying to see if we can dispose assets at a NAV or premium to our NAV and return funds to shareholders. I think we've been very successful in that strategy over the last few years. And for the first six months of this year, interim reporting, we managed to return special dividends of R462 million already to shareholders. And we have some disposals in the pipelines, transactions that are very close to finalisation. And we anticipate further special dividends to shareholders for the later parts of the year. So, how close is close in terms of ultimate conclusion? I see that you do say that you have received approval from competition authorities, but there are outstanding conditions still. So, perhaps maybe just talk to us about that and whether you reckon you could put these disposals in the can by the end of the year? Yes, I think we're very positive on it. It's four specific poem-related assets. It's three farming operations and one packhouse in Paul. We've signed agreements on all four of those assets. Three of them were subject to Competition Commission approvals. Those three have all been obtained. And those three, the larger ones, are all in the transfer process that's part of the Deeds Office transfer process. So, that's actually the main CP that's still outstanding. But it's a process. We have all the approvals. It's now just a matter of time. And that's why we're confident we are going to conclude those transactions before the end of the year. Operationally, though, how would you describe the environment right now? I mean, you're operating in a sector where you were hit by the El Nino, a lot drier conditions than we're accustomed to. And we have seen the ramifications thereof in many parts of Southern Africa. It's resulted in a reduction in many crop sizes, a reduction in profitability. And it has been tough. But what has the impact of the El Nino been on the zeal group? Yes, it's definitely been an impact. I think the important thing is we always like to look forward and forward the projection is for El Nino, which is more rain. So, that's positive. But our last years or the last six months results have definitely been negatively impacted by the El Nino. The maize crops, the sunflower crops were much smaller than in prior years. So, that had an impact. And then also on the chemical side, if it's dry and it doesn't rain so much, fewer chemicals are used. So, that definitely had an impact on our chemicals business. But I think our South African business has been quite resilient. I think there's a renewed optimism in the agri sector about what lies ahead. I mean, obviously, weather is one part. But I think a big reason for that is also maybe the government of national unity. I think farmers are optimistic of what lies ahead. But obviously, when you're a farmer, you can reduce crops on your farm. You still need to get it to ports and in silos. And that's why municipal delivery, infrastructure, efficient ports are crucial to a farmer being successful. And those are the things that obviously we can see is moving in the right direction. But those are the critical stuff that needs to be fixed. Because while South Africans were perhaps a little happier, the fact that our economy actually grew in the second quarter, and we skirted a technical recession as it were, it's interesting to see that the agricultural sector in and of itself is in recession. I mean, you have been lower since 2023, the third quarter. And if we look at what Statistics of Africa is saying in terms of the performance of the sector from January up until June, it is down by 10%. So perhaps just talk about that, specifically, Johan, and what some of the depressed economic prospects right now for your sector have meant, and exactly what you're hoping this GNU can do to turn the fortunes around. Yeah, I think, as I said, I mean, obviously, it depends what part of the farming sector you're looking at. If you're looking at single row crops, things like maize, sunflower, you know, there your input costs are very relevant for you, and also what the soft commodity prices are. So we've obviously come from a high interest rate environment, high fuel prices, high chemical prices. So that means the input costs that farmers have to put into their farms, just to be able to have a crop is obviously very expensive. And then the soft commodity, that's a function of world economies. If that price is not at the level that you expect it to be, obviously, you're under pressure. So hopefully going forward now, you can see the interest rate cycle is coming down, that'll have a positive impact on fuel prices, we can see the range strengthening, those are all very positive in terms of the input for farmers. Obviously, on the counter side, if you're in the agricultural sector, where you're dependent on exporting crops, the strong ran is not positive for you. But I think in the long run, you know, we would all want a stronger ran, but the lower interest rates that we're projecting will definitely be good for farmers. A quick one on food inflation, just as we're talking about costs, a few things being shared there, particularly from competition authorities who monitor food prices were concerned that the end consumer is not receiving some of the benefits that is being experienced in the food value chain from lower prices, particularly internationally. What are you seeing by way of food inflation trends? I think there's definitely inflation on the food side, but I think it's very much a function of what the farmer needs to do to be able to produce on his farm. So the value chain is quite long, you know, it goes from the agri inputs to the farmer, then it obviously gets harvested, it can either go to a silo or goes to a packhouse, then it gets to the retailer. And then very often it gets to the consumer. So one must really look where the margin lies. And I think from a farmer's point of view, the margins are not big. I don't think the farmers are taking excessive margins. Okay, Johan, just one last question. So you are hoping to wrap up the asset disposals soon, hoping that ultimately it will have an improvement also on a net asset value. It's a forward looking question as to what next? Yeah, I mean, we obviously, you know, we're trying to continue with our strategy. And like I said, we, you know, three or four years ago, when we started on this process, the discount to our NAV was about 3 billion Rand, it's currently only 300 million Rand. So I think our strategy is working. Once the POM assets have been sold and paid out to shareholders, potentially, you know, we'll have one asset left. That's our seed and chemical business. I think first and foremost, we must make sure that that business grows. But obviously, as part of our strategy, we're speaking to various parties at the top level, but also certain parts of that business to see if we can realise further value for shareholders. Okay. And we'll be following you along the way, as always. But with so we'll leave it there for now. Thanks so much for your time. Johan Leroux, the CEO over at ZERDA.

Zeder swung into an interim loss of 4.1 cents per share, citing adjustments to the valuations of its unlisted asset. The agriculture-focused investment group opted not to pay an interim dividend but said it would consider paying a special dividend as proceeds from disposals are received. CNBC Africa is joined by Johann Le Roux, CEO, Zeder for more. 

Zeder half-year performance disappoints

Zeder swung into an interim loss of 4.1 cents per share, citing adjustments to the valuations of its unlisted asset. 

Zeder half-year performance disappoints

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Zeder half-year performance disappoints

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