13 of 2022`

Newsletter No 13 /08April 2022                                 


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Message from Hennie Bruwer CEO Cotton SA

Cotton futures remains close to an 11-year high amid expectations of lower supplies due to drought in the US planting areas and stronger demand for cotton. Rainfall has been very low since early January in the northwest part of Texas, which accounts for about 40% of all US cotton production. Also, the rising cost of pesticides may limit the growth in US acreage. Globally the cotton price is derived from the New York Features (NYF) and the Cotlook Indices. The situation in America, therefore, has a significant impact on the baseline price of the commodity.
Meanwhile, the demand for local cotton is rising as local retail strives to reach the Master Plan targets of 65% local procurement by 2030. Much has been done to build on the positive relationships with our retailers and they remain committed to source local cotton. Volums unfortunately remain a problem. The spotlight is on sustainably produced cotton as one of the performance areas to reduce the carbon footprint. Although this is good news for our producers, this will have a ripple effect on higher prices for retail and eventually the consumers.
According to the third crop estimate, the cotton crop will be about 13% lower this year than the previous season. The harvest is estimated at 68 000 bales of lint. The estimated plantings are set at 14 000 hectares. Regardless of the higher commodity price, the crop estimates have not increased from the previous season, and in addition, producers suffered considerable damage from the sustained rain and even hail. The producers in the Northwest Province lost almost half of the estimated crop due to the heavy rain, while several regions, including the Northern Cape, experienced hail damage. Limpopo and Mpumalanga have been experiencing drought since Januarie 2022, impacting their crop. The hope now is that there will be no further damage and that the rain will improve yields.
The expected yield for the current season under irrigation is 4 140 kilograms seedcotton per hectare compared to the previous season’s 4 515 kilograms per hectare. The expected yield is 1 500 kilograms per hectare on dry land compared to the previous season’s 1 468 kilograms per hectare.
Access to new seed technology to ensure shorter growers remains a priority and discussions are continuously taking place with various industry role-players to try and manage this effectively. Cotton SA is investigating various funding opportunities to assist with additional funding to continue to deliver a sustainable service to the industry.

Labat, CSIR sign MoU to accelerate industrial cannabis processing

By Schalk Burger

Previous JSE-listed venture capital company Labat Africa has signed a memorandum of understanding (MoU) with the Council for Scientific and Industrial Research (CSIR) that will see both parties engage in the production and processing of cannabis and hemp.

The agreement will solidify collaboration and cooperation between the CSIR and Labat across the value chain of cannabis and hemp production for industries ranging from pharmaceuticals to textiles to energy, says Labat CE Brian van Rooyen.

“The agreement is about the CSIR wanting to commercialise medicinal cannabis and getting some traction in the industrial side of hemp production and processing. The partnership is collaborative and serves to benefit both parties,” he adds.

The CEs from Labat and the CSIR also agreed on accelerating cannabis and hemp processing for energy, automotive, textile, packaging and construction products.

The agreement makes provision for the use, upgrade and expansion of the CSIR Coega hemp processing facility, the acceleration of hemp biomass and waste into energy applications in KwaZulu-Natal and the beneficiation of biocomposites and biopolymers that will be applied in the automotive, textile, construction and packaging industries.

“For the beneficiation of biocomposites and biopolymers, the conversion of natural fibre to biopolymer is where the value-add is. We have a number of confirmed private sector and State-owned enterprises as clients. One of these is the largest textile manufacturing company in South Africa who will be using the material in their production rollout,” says Van Rooyen.

The Industrial hemp market is worth about $4.9-billion, or R71-billion, globally and is projected to grow to $18.6-billion, or R269-billion, by 2027. South africa’s hemp industry is projected to be worth R28-billion in five years’ time.

“No large-scale industrial hemp processing operation exists in africa currently. The producers do not have the technological capability or the financial means to scale the business to the required global levels. South Africa has remained a cottage industry due to historical regulatory issues, social stigma, minimal technological development and the absence of a reliable supply chain for industrial application.

“Our agreement with the CSIR paves the way toward creating a larger, more sophisticated hemp industry, through the development of industrial hemp technologies in order to create that reliability within and throughout the supply chain, locally in South Africa as well as in the Southern African region,” says Van Rooyen.

The collaboration will focus on producing some fast-moving consumer goods among the 25 000 established hemp-based and hemp-derived products in the nine subsectors of the manufacturing industry, all of which can create as many as 20 000 jobs in South Africa.

Further, the agreement on cannabis includes the production and processing of the plant for medical purposes; active pharmaceutical ingredient (API) research, development and production; the proliferation of Labat’s wellness range; and further development of tetrahydrocannabinol-, cannabidiol-infused pharmaceutical products, other cannabis compounds, as well as terpenes using the pharmaceutical technology innovation platform FuturePHARMA.

FuturePHARMA is an open inoovation facility integrating molecular engineering and continuous pharmaceutical manufacturing for Africa.

Cannabis Industry

“The MoU ties into Labat’s latest moves in the industry. We look to be involved in almost every part of the cannabis value chain, from genetics to retail and dispensary,” says Labat business development executive Herschel Maasdorp.

Sweetwaters, recently acquired by Labat in a strategic cash transaction, champions a team of highly skilled geneticists, breeders, growers and researchers producing high-quality cannabis for clients in Australia and Europe, as well as for local dispensing to medicinal patients through the Biodata research project.

Sweetwaters has and continues to service their offtake agreement.

Further, Labat Africa, through Biodata, has started conducting observational research into medical cannabis as an opioid replacement for pain management. The research was approved by the pharma-ethics committee of South African Health Products Regulatory Authority in June last year.

“Labat has also begun to engage with medical aid companies on the probability of recognising and providing cover for cannabinoid-based medicines for its clients.”

Additionally, Labat Healthcare’s genetics, seeds and breeding subsidiary Ace Genetics has pre-contractual agreements with international seed banks and has launched the African Cannabis Genome and Landrace Project at Sweetwaters Aquaponics to map 12 African varieties of the plant, which include Malawi Gold, Durban Poison, Swazi Gold and Rooibaard, besides others, at the Ace Genetics Nursery that will make provision for a breeding programme that will ensure that indigenous knowledge systems are preserved.

“Our company’s vision remains to be the number one cannabis company in Africa and to maintain that position. With all of the acquisitions, and a focus on increasing revenues ,building efficiencies and creating a sustainability model for all subsidiaries, the recently signed agreements over the last two years ensure that we are on a profitable and value-creating path,” says Van Rooyen


Fashion is back, perhaps, all thanks to the recent Valentino haute couture show

Words: Nokubonga Thusi

Valentino’s elevated neons and acidic hues from their recent haute couture show.
If the recent Valentino haute couture show is anything to go by, fashion is back and we finally have some luxurious threads to splurge on. After two years of tracksuits and pandemic dressing, there has been an overreaction from the runways that signals a mood that’s refreshingly positive and unapologetically vibrant by way of elevated neons and bold, acidic hues that give relaxed suiting and voluminous silhouettes the drama we’ve all been craving.   BD

Pick n Pay – trading and earnings update

Shareholders are advised that Pick n Pay Stores Ltd. is in the process of finalising its financial results for the 52 weeks ended 27 February 2022 (FY22), which are due to be published on 17 May 2022.

Trading update
Group sales increased 5.2% to R97.9 billion (FY21: R93.1 billion). The Group’s South Africa segment increased sales by 5.1% to R94.5 billion, with like-for-like sales growth of 4.4%. The Group delivered on its commitment to give customers lower prices and better value, with internal selling price inflation restricted to 2.9% over the year. The Group’s Rest of Africa segment increased sales by 5.6%, and by 8.7% on a constant currency basis.

Sales performance reflects impact of significant trade disruption
Over the course of the year, the Group’s trading performance was disrupted by two factors: severe damage to trading and property as a result of the civil unrest in July 2021 and – to a lesser extent – the resumption of trading restrictions over the sale of liquor in June 2021. These disruptions resulted in an estimated R2.7 billion of lost sales over the year.

Impact of civil unrest
As previously reported, 212 Pick n Pay and Boxer stores (10% of the Group’s store estate) were damaged by looting and fire in the violence of July 2021, with a further 551 stores (27% of our store estate) closed for safety reasons at the height of the unrest. The Group’s two largest distribution centres in KwaZulu-Natal suffered severe damage to infrastructure, and were looted of all stock.

The Group’s rapid recovery from this devastation bears testimony to the tenacity and teamwork of its staff, franchise partners, suppliers and service providers. The two severely damaged distribution centres were back in operation within two weeks, and only 16 stores (nine Pick n Pay and seven Boxer) remain closed. These stores are in severely damaged shopping centres, where reopening depends on the restoration of the centre as a whole.

Overall, as a result of the unrest, the Group incurred material damage losses (stock, assets and other costs) of R870 million. The Group recovered these losses in full in FY22 under its SASRIA special riot insurance covers.

In addition, the Group estimates that the unrest resulted in approximately R1.8 billion of lost sales in FY22. The Group’s business interruption (loss of profits) claims remain open, as not all of the affected stores have reopened for trade. The Group has provided business interruption insurers with interim submissions setting out the earnings lost as a result of the unrest up to and including end October 2021.The Group received interim payments of R145 million from business interruption insurers in respect of these submissions in March 2022 (post year-end). These recoveries have not been accounted for in the Group’s FY22 results in line with the technical requirements of International Financial Reporting Standards. To present the Group’s underlying performance in its FY22 financial year, and its progress to date in finalising its civil unrest claims, additional pro forma financial information is provided below, which includes the insurance recoveries received after year-end. The balance of lost earnings is expected to be recovered in FY23, once insurers have completed the assessment of the full and final business interruption claim.

Category performance
Group liquor sales increased 57.2% year-on-year. The Group lost a further 66 liquor trading days this year (FY21: 209 days) as a result of Covid-19 trading restrictions, with an estimated R0.9 billion in lost sales (FY21: R2.5 billion).
The Group’s clothing division delivered a strong performance, with sales growth of 21.0% year-on-year, driven once again by market share gains across a number of women’s, men’s and childrenswear categories. On a two-year compound annual growth basis, clothing sales have increased by 11.7%.
The Group’s on-demand online service ASAP! has delivered year-on-year growth of over 300% since its launch in August 2021. ASAP! is only one element of the Group’s online retail offer, which includes its traditional scheduled delivery service and a Click n Collect offer. The Group’s combined online offer has delivered compound annual growth of 72.5% over the past two years.

Earnings update
The Group’s FY22 earnings reflects the impact of the significant trade disruption summarised above. As confirmed, the Group has recovered all its material damage losses related to the unrest, which are included in the FY22 results.

Progress on strategic priorities
The Group is well-advanced in finalising its strategic plan under the leadership of new CEO, Pieter Boone. The plan will target an acceleration in growth on a sustainable basis, and will focus on a number of key areas, including:
– a revitalised customer value proposition in Pick n Pay, with a simpler and more compelling approach to differentiating our stores so that each store feels local and excites customers. This will build on excellent progress over the past year in strengthening our offer to more affluent customers, with the successful refurbishment of 40 Pick n Pay Select supermarkets, all of which are delivering strong customer growth through innovation in product, design, layout and convenience
– a determination to offer even lower prices, better value, and better service to customers. This will be particularly important to lower-income customers in a period when spending power is likely to be further squeezed. Core to this will be the delivery of R3.0 billion of savings over the next 3 years through Project Future – with identified efficiencies across our operations delivering a swifter and more efficient business
– a further acceleration in the development of our Boxer Ltd.-range discount business, which is continuing to delight customers in search of exceptional value, great promotions and great service
– a step change in the growth and development of the Group’s omnichannel offer and an acceleration in other high-growth divisions including clothing
– creating a future-focused organisation at every level, with trained, motivated and engaged colleagues in every part of the organisation

The most talked about Oscars dresses of all time

Kate Hudson, 2001

The press skewered Kate Hudson’s Oscars debut, hating on everything from the Stella McCartney cape to the extremely-curly hair. But the young actress didn’t pay any mind to the criticism. “I felt so beautiful, and I have it in my closet still to the day,” she said at a 2012  Vogue event.

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