Zeder gets a fruitier diet - article published in Cape Business News August 2008 ( Friday 15 August 2008 )

PSG owned agribusiness investor Zeder has taken a nibble in Capespan, accumulating a small - but strategic - shareholding in the fruit exporting company.

Taking a slice of Capespan seems a logical step for Zeder, which has enjoyed remarkable success in buying into food group Pioneer Foods (via Kaap Agri) and liquor and wine producer KWV Limited.
Building a large stake in Capespan would make sense for Zeder, which perhaps is too weighted towards its holdings in Pioneer and KWV. The remainder of Zeder's portfolio comprises much smaller stakes in former co-operative businesses like Suidwes Investments, Tuinroete Agri, OVK, BKB and KLK.
Capespan – formed by the merger of Unifruco and Outspan in the mid nineties - has kept a fairly low profile of late. But Zeder buying into the business makes sound fundamental sense with food prices rising and the rand likely to weaken against major trading currencies.
It would also seem Capespan has shown considerable operational improvement lately as well.
Capespan's results for the 2007 financial year showed turnover breaking through the R2 billion mark for the first time – rising almost 20% from 2006's R1.79 billion.
Even more encouraging was that operating profit jumped a wholesome 157% to almost R100 million.
Capespan's fruit volume was up 4% to 59 million cartons in 2007 even though the fruit pallets handled by its port terminals increased by only 1%. Growth in general cargo volumes, handled by port operation FPT (Fresh Produce Terminals), was 83% year on year - taking the 2007 total to 716 000 tons.
Another important development for Capespan in 2007 was the stepping up of farming activity with the group – via associate company Rapiprop - acquiring seven farming units. This brings Capespan's portfolio to 12 farms.
Most noteworthy is Rapiprop's acquisition of apple and pear farm, Applethwaite near Grabouw – which must say a lot about the longer term prospects for the long suffering apple industry.
Internationally Capespan also appears to be pushing its marketing influence.
At the release of the 2007 results MD Neil Oosthuizen says expanding Capespan's global footprint and positioning the group in new markets such as India and China remains a priority. "To this effect, we recently concluded a memorandum of understanding with Mahindra in India, initiating a pilot project exploring fruit industry business opportunities."
At this juncture one wonders whether Zeder – which has a 8% indirect stake in Capespan via an 18% holding in Outspan – will be able to build a stake of close to 25% in the fruit business.
Zeder aims to hold between 20% to 25% of its individual investments – a shareholding level that affords a level of influence without being overbearing.
It would seem the Capespan shares are tightly held, the share last trading at the beginning of 2008 at 110c. Considering that Capespan produced headline earnings of 20c/share in the 2007 financial year it seems Zeder probably did not overpay for its holding in Capespan.
Quite possibly Capespan, which seems to be building some heartening operational momentum, may well prove one of Zeder's sweetest investments in years to come.
[Article published by Cape Business News August 2008]

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