TWK CFO unpacks the lessons he has learnt on optimising the opportunities in agriculture to attain financial success.
Eddie Fivaz grew up on a farm in the Free State and says even though he enjoyed the outdoors, the animals, the sun on his skin and the smell of freshly ploughed soil after good rain, his interest was always in the numbers behind it.
“You may be an excellent farmer, have perfect planning skills and even plant your crops at the right time, but there are plenty of other factors that may be out of your control but are critical factors for a farmer to consider,” he says.
“Market prices, the level of mechanisation, optimum crops to produce and even cash flow planning are critical factors to consider. If not planned for and effectively executed, a basic phenomenon like drought or too much rain can have a massive impact on farmers. Therefore, my real interest was how do you plan for these contingencies, keep costs down, yields up, maximise profits and plan your cash flow in case things go wrong? If you’re not ready and prepared for downturns, it can be devastating.”
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A decade of change
Eddie pursued the finance side of agri-business and when he was appointed as CFO of TWK at just 35, it was an opportunity to grow and help to take the group to the next level.
A priority was to get their financial statements IFRS compliant, which he managed to get right during the first financial year. In 2014, they restructured the group into a three-tier group structure, improving its ownership structure to be more inclusive by also allowing non-farmers to invest in the group. “We unlocked good value for shareholders and enabled us to grow the business,” he notes.
When he joined the group, there weren't enough committed credit lines from the banks and the maturity profile of the debt wasn’t aligned with realisation of assets or income and therefore put pressure on cash flow. “I managed to restructure the debt profile of the company to make sure realisation of assets or income is aligned with the repayment structure and increase the committed credit lines to provide for the seasonality of the agri-business, and therefore the group’s cash flow has improved dramatically.”
He says he believed TWK was too dependent on the Land Bank. To depend on only one source of debt funding is a risk, he says, explaining that he set up a Special Purpose Vehicle structure that enabled the company to get more lenders into the structure in a cost-effective manner. Standard bank, FNB and Absa are now part of their funding portfolio. “This has reduced dependency on the Land Bank, which is under severe strain and therefore we successfully mitigated that risk.”
Ground-breaking listing
In October 2021, TWK Investments Ltd listed on the new Cape Town stock exchange with a secondary listing on A2X by end of November, the first company to have this listing arrangement. This pioneering collaboration opened the door for listed companies to have options to access both the retail and wholesale markets in South Africa.
Eddie says the secondary listing is an opportunity to attract potential new investors, grow liquidity in the company’s shares and broaden the group’s shareholder base.
Thriving with new opportunities
TWK is a very diverse company with many different income streams. Eddie says understanding the cash flow of the company on a day-to-day basis makes it critical to have access to reliable and accurate information at all times.
He says in the past it was easier to predict the future based on historical assumptions, “but this is no longer the case. The world and especially the agri sector is now quite dynamic and fast changing, and therefore we need to be able to adapt quickly and effectively.”
Eddie notes that farming has evolved and so have the demands and needs of customers, and with that, new opportunities have opened up.
In approaching these prospects, he says, “We don’t have a one-size-fits-all approach. We have infrastructure, knowledge and resources to build on our business model, and are always looking for ways to unlock value in new opportunities.” For example, the group recently bought 20,000 hectares of timber plantations. It offers the opportunity to deliver good quality, high volume timber for export and local markets in a growing industry.
Looking ahead
To further optimise its operations, the group is currently in the process of implementing a new ERP system. He explains that, “Accurate information is important in our business and we realise if we want to grow, technology is critical. Initially our plan was for it to be a 24-month project, but we have fast tracked that to 18 months and it will be implemented in the new financial year.
