Strong balance sheet, improved dividend, agri upward momentum and planned site expansions support second-half optimism
KAL Group, the unique South African agri, fuel & convenience speciality retailer listed on the JSE, today reported a steady performance for the six months ended March 2025 (H1 or this period). Encouraged by the positive momentum to date, an even better performance in H2 is expected. The Group delivered solid earnings, underpinned by a diversified business model, disciplined capital management, and strong operating fundamentals.
This is despite the tough operating environment, which continues to present economic challenges, and geopolitical discomfort.
Highlights against strategy
The Group reported R557,1 million in EBITDA and R440,6 million in profit before tax (PBT) for the period. It declared an interim dividend of 56 cents per share – an increase from 54 cents per share in 2024 – reflecting business confidence and reinforcing its commitment to shareholder returns.
“KAL Group has grown tenfold over the past 14 years. To put it in perspective – fourteen years ago, we made just 10% of what we’ve reported this half. That kind of growth, even in a flat period, shows that our business remains solid,” said Sean Walsh, CEO of KAL Group.
During the period, the Group reduced debt by R243,5 million on a comparable basis, and its debt-to-equity ratio decreased to 48,4% from 56,5% in the previous year. The Group’s balance sheet remains robust, with healthy cash flow, strong working capital, and debt levels at its lowest in a decade.
“This didn’t happen overnight,” said Walsh. “It’s the result of years of focus. Over the past two years, we’ve deliberately prioritised debt stabilisation and cash preservation, including refraining from major expansion to bed down the R1 billion PEG Retail Holdings acquisition. With the backing of a strong balance sheet and reduced debt levels, we are well poised for the next phase of our journey in executing our F30 strategy. We have set a realistic growth target of R1,5 billion PBT by 2030, targeting a debt-to-equity ratio of 40%, and delivering a return on equity of 15%, as well as a return on invested capital (ROIC) of 14%. We will achieve this through footprint expansion, market share growth, and improved efficiencies with the team expecting to realise benefits of significant inroads already made by year end.”
Understanding KAL Group’s financial indicators
While revenue was impacted by a 12,4% decline in fuel prices compared to the prior period — with fuel comprising 57% of the Group’s revenue — this had no material effect on profitability due to the regulated nature of fuel pricing, although price gains were R10m lower in H1 vs the prior year. Walsh explained that a R5 change in the fuel price per litre can shift revenue by as much as R250 million in a month, yet it has little bearing on gross profit apart from the once off stock price adjustment. In fact, the Group’s gross profit of R1,7 billion increased by 0,9% (and by 1,5% when excluding the impact of fuel price change gains).
“Turnover can be a misleading indicator of the health of our business, given that over half of our revenue is derived from fuel — a category heavily influenced by factors outside our control,” said Walsh. “This is why we don’t rely on turnover alone to assess performance. A key driver for us is ROIC, which was solid during the period at an unannualised 7,6%, and we do expect this to increase in the next half,” said Walsh, adding that the company remains focussed on maximising shareholder value. “In addition, our diversified model continues to shield the business from volatility and economic pressures.”
Business unit results
The Agrimark business segment delivered a good performance reporting a 2,4% year-on-year increase in PBT. While the segment felt the impact of slow growth in the general retail sector and a slowdown in building activity — with cement volumes down 0,7%, the lower interest rate environment is seeing farmers beginning to reinvest and spend capital after several tough years marked by high interest rates and investment in renewable energy to counter loadshedding. While strong sales of netting infrastructure at Agrimark signal a return of capital investment to farms, the strong sales of fertilizer in Agrimark also signal execution of strategy in the steady market share growth in the Eastern Cape.
During the period, the Group’s fuel and convenience business, TFC Operations (TFC), was rebranded to PEG Retail Operations (PEG). PEG was affected by lower fuel prices, subdued volumes, and the shift in the Easter holiday trading period from March last year to April this year. PBT declined by 4,8% when excluding the impact of fuel price change gains. “We are excited that five new fuel sites and three new quick service restaurants (QSRs) are in the pipeline for the next half of the year, and the impact of the first post-COVID-19 normalised Easter travelling routes to Moria is very encouraging,” said Walsh, referring to the millions of members of the ZCC (Zion Christian Church) who embarked on their annual pilgrimage to the area, outside Polokwane, for the first time since 2019.
KAL Group in the context of the operating environment
“There is little indication of any significant improvement in general economic conditions in the short term, and persistently low GDP forecasts remain a concern,” said Walsh. “Encouragingly, the agricultural sector has experienced a more favourable year, and the production outlook remains positive.”
Commenting on the potential impact of recently imposed US tariffs on South African exports, Walsh noted that while farm-level profitability could be affected by downward pressure on export prices, KAL Group’s exposure is expected to be limited. “Thanks to our product and geographical diversification, the impact will likely be confined to select categories on a micro level — stone fruit and wine in the Western Cape, as well as table grapes, dried fruit, and citrus in both the Western and Northern Cape,” he explained.
Outlook
Walsh said the Group remains optimistic about the second half of the year. “We’re excited about the momentum we’ve built, which sets a solid foundation for the next six months. With site expansions and acquisitions now ready to be rolled out, and considering the positive trend seen during the first half — including the impact of Easter holidays, which fell in April and is PEG’s second-biggest retail trading period — we anticipate a notable uplift in performance.”
“While the market has historically become accustomed to growth rates of 15% for the business, the landscape has changed significantly due to the global economic reset resulting in conservative and subdued growth projections on a global and local scale. Notwithstanding these headwinds, we remain firmly committed to delivering long-term shareholder value through market share growth, value accretive capital investments, efficiencies and optimisation efforts in line with the execution of our F30 Strategy. Continued management shareholding demonstrates our strong alignment with investors and our belief in the Group’s strategy.”