PORT Elizabeth-based agri-services conglomerate BKB is hoping for a quick turnaround at its loss-making grain trading subsidiary GrainCo. BKB, which has a turnover of about R4.5-billion a year, released its annual report for the year ending June, showing a hefty R48-million pretax loss at GrainCo.
GrainCo services the grain supply chain through trading‚ storage and handling as well as logistical services. Financial director Kamlesh Riga said yesterday a revised business model and other corrective actions had been implemented at GrainCo.
He said in the year ending June, trading conditions were difficult due to negative spreads in the Safex wheat market and a drop in transport margins due to lower-volume commodity exports and high fuel costs. Trading conditions were further exacerbated by a large impairment of debtors in GrainCo.
Riga said significant corrective actions had already been implemented at GrainCo since the founder managers left the company during the financial year.
These included the appointment of Ben Vermooten as the new chief executive officer‚ the implementation of a revised business model‚ reduction in prefunded subcontractor vehicles and also the restoring of credit approval disciplines and debtor collection.
"We are confident that these and other actions will return the grain division to profitability."
Riga said that since year-end there had been indications that GrainCo's trading had improved.
GrainCo's return to profitability is key for BKB in the financial year ahead. The company has taken big strides to diversify its operating base from its traditional core in wool marketing services in the Eastern Cape to include countrywide interests in livestock auctioneering‚ financial services‚ sugar and an extensive investment property portfolio.
In the year ending June, BKB hiked revenue by 32% to R4.5-billion‚ with the company's wool brokerage services providing the impetus on the back of rising wool and mohair prices. The livestock and auctioneering division achieved a consistent profit, and the sugar division made its budgeted profit.
But the losses at GrainCo pulled operating profits down 32% to R113-million. Headline earnings more than halved to 33c per share. The company said this was the first drop in profit for "many years". – BDlive