[TOP STORY] TWK is optimising value chains and gaining market share

SIMON BROWN: I’m chatting now with Eddie Fivaz, CFO at TWK. Results [are out] for August, 2022 – that’s the year-end. Revenue up 17.7%, headline earnings a little over 45% higher, and a R1.50 full-year dividend. That’s a little over 31% higher. Eddie, I appreciate the time today. You talk around, as a corporate strategy, optimising value chains. I look at these results and that suggests that’s very much what’s happening in the business. And you’re getting some market share at the same time.

EDDIE FIVAZ: Yes, definitely. We gained some good market share especially in KZN. Our farmers – commercial farmers specifically, but also interestingly enough emerging farmers – saw good growth, even though on a low base from the previous year; good growth from those markets. So we are really excited about it with these farmers of the future. And we like to support them as well, with obviously our good strong commercial farmers.

SIMON BROWN: Another space you’re picking up: you’ve got timber, and of course Peak Timbers is now in these results for the full year. But you say that your exports are up some 80%-odd, partly because of Ukraine and the lack of supply out of there. Also Indonesia – you talk about forest fires there. You’ve picked up a new customer. Are they likely to stay or do they perhaps move back to their old supplier? Would you have an edge now, a foot in the door?

EDDIE FIVAZ: Definitely a foot in the door. That’s our expectation. So our exports are up 88% percent on the previous year. And even with that higher volume, it’s not the highest volume that we’ve had in the past. Pre-Covid our volumes were close to 800 000 tonnes compared to the 660 000 tonnes that we had this year. We expect our exports for the new financial year to be on par with our maximum capacity at our export facility.

The growth is really from the European countries, but also from our old customers [in] Japan and China. And yes, we expect the new customers to stay on board. South Africa is known for very good quality wood chips. And with our history, good product, we believe that it will be a sustainable relationship.

SIMON BROWN: On the internal sales, you mentioned that mine demand was lower. There was a strike at one of your customers. Is that significant? Obviously it hurt in the numbers, and it would be back in the next financial year – but was that really significant for the sector?

EDDIE FIVAZ: Simon, any loss is significant for us and we don’t like any losses. But luckily because of our diversified model, not only in terms of different segments, but also diversified in our timber segment, we were able to supply the timber to different markets, luckily. But we think that we will be able to supply the mines with our timber products in the new financial year. But like I said, good growth from other markets. And so it will not influence us as badly.

SIMON BROWN: Retail is also really strong, up 27.75%. That’s 29 outlets across Mpumalanga and KZN, partly driven by fertilisers and fertiliser price increases. Are you seeing significant inflationary pressure across the business, and are you able to pass that on to customers?

EDDIE FIVAZ: Yes, obviously we were able to pass on the prices to customers. Luckily the price of fertiliser [has] come down since then. But luckily the 2022 harvest season was very good. So the farmers were able to manage that.

There’s also a good expectation for revenue certainty of farmers in 2023, given the elevated Safex (South African Futures Exchange) commodity prices and also the expectations of good rain.

So they were able to absorb the higher fertiliser prices. We see them coming down now. And also we expect that the volumes of fertilisers and fertiliser sales from our branches will increase in the new season, because the farmers were able to reduce their application in 2022 but it’s only really short lived. They can’t continue with that. So we expect they will continue with normal applications that will obviously support volume sales, but at lower prices and margins.

SIMON BROWN: Okay. Motor and tyres. We saw tractor sales for October earlier in the week at a 40-year high. You don’t sell tractors, you sell Isuzu, you sell Toyota and the like. But one of the challenges with the motor dealers has been simply supply of vehicles. Has that normalised? Did it normalise towards the end of the period?

Read: Toyota resumes production at its plant in Durban

EDDIE FIVAZ: Yes, we do sell tractors as well. We actually [sell] New Holland tractors. There was an increase in sales from that as well. But to answer your question, luckily we not only sell Toyotas: we also have the Isuzu and Haval brands in our business. So that really helped. Some of the products have come through now, so we are able to supply especially the lower-end models. We expect more volumes to come through by the beginning of the new year, from February. It’s still a struggle, but we expect the volumes to be back to normal from February 2023.

SIMON BROWN: A last question, looking forward and having read the report released. The future’s uncertain and we have inflation, we have [US mid-term] elections, we’ve got war in Europe and the like, but generally the business looks very well positioned for at least the next – if not beyond that – financial year.

EDDIE FIVAZ: Absolutely, yes. Like I said, we expect the volumes of exports to be at high levels, the best ever. We are really positioned with a strong balance sheet, cash flows, and support from different banks. We do have the liquidity. So yes, we are [well] positioned for the new financial year. We are full of energy and we believe that we will be able to maintain the momentum of the last year.

SIMON BROWN: We’ll leave it there. Eddie Fivaz, CFO at TWK, I appreciate the time.

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