The old saying purports that success breeds success, no matter what business you are in. It is a philosophy that has been adopted, adapted and applied with spectacular results at Profert Holdings (Pty) Ltd.
The company has in recent years undertaken a remarkable strategy of diversification through acquisitions and a quick look at the Group’s portfolio reveals a business with interests in fertilizers, agriculture, civil engineering and candles.
What links these industries together is a determined drive for growth, borne out by a shrewd investment policy in successful businesses, as Dirk Opperman, Group Director: Business Development & Farming Operations outlines:
“We currently operate 19 companies within the Group but we follow a model where we preferably don’t buy 100 per cent of companies. Our strategy is to identify growing companies and to try to buy up to 70 per cent into them and to help them to grow further. We always try to keep the owners involved and work together with them, so that we don’t lose their knowledge and skills.”
It is a policy that has worked wonderfully well for the business which has its headquarters in Potchefstroom in the North West, and the company has grown at a rapid rate since first launched back in 1999.
“Profert was first founded thirteen years ago by three individuals who all came from the fertilizer industry. The company was 18 months in the planning and was launched as a joint venture between Senwes Limited and the three individuals with extensive knowledge of the fertilizer industry. It took no less than five years for Profert to firmly establish itself in the market, and since then it has evolved from Profert to become Profert Holdings,” Opperman describes.
“Today two of our three founders remain on the board, with Abie van der Walt serving as Executive Chairman and Anton Van Rooyen our Group Director: Plant Nutrition and Marketing.
“Profert Fertilizer remains our core business and we specialize in granular and liquid fertilizers, which includes our premium Black range (Black UREA and Black DAP), a bio-organic coated granular fertilizer range, and our liquid fertilizer range called Amplify. Profert has mixing plants in all the provinces in South Africa and we produce 800 to 1,200 tonnes of fertilizer per day,” he continues.
“We have a slogan: “We are an agriculture company from the farm to the fork” and that incorporates the whole agricultural value chain. In recent years we have added additional businesses to the Group and we now operate clusters.”
One of the new clusters encompasses infrastructure and development and Opperman says that whilst the transition is not necessarily immediately obvious, Profert had key business strengths that make the link profitable:
“One of the big development areas in South Africa in recent times has been building and the provision of housing and there has been a huge backlog. We have been able to use our infrastructure equipment for digging infrastructure like drainage works and laying foundations and this has proved a useful additional revenue stream,” he enthuses.
Opperman has a very good explanation for the diversification of Profert’s interests: “One of the biggest challenges we used to face was the issue of seasonality. We have a large market share (as much as 25 per cent) of South Africa’s fertilizer industry but as much as 70 per cent of the fertilizer is used in a three month period. We wanted to diversify to give us a more constant flow of business,” he suggests.
“We now have the 19 separate businesses and each one is expected to stand on its own (financially) and each must regard itself as an individual profit centre. Of course the businesses will have some synergy as they are part of the wider Group but it is the people in each business that have expertise and knowledge and help to make them successful.”
Whilst Opperman indicates that roughly 75 per cent of revenue still comes from fertilizer – with the Group’s main centre based at the Port of Durban, other investments such as animal healthcare business Lionel’s Veterinary Supplies and Costas Candles have helped to contribute and continue to offer tremendous growth opportunities.
“We have opportunities to develop our brands across the whole of Africa and in 2007 we purchased the Lionel’s business, which was followed by acquisitions in Australia which have helped to give us a wider global footprint,” he says.
“The animal feed and veterinary care sales efforts have to date concentrated on the coastal areas of South Africa but we are now starting to look inland.”
Another acquisition in 2008 was Woody’s Meat, a business that specializes in manufacturing delicious bacon, while the Costas Candles venture (Costas is the second largest manufacturer of candles in the country) came to fruition because candle wax is a by-product of the petroleum business, much the same as the fertilizers.
It should be stressed that Profert does not manufacture fertilizers, rather importing mainly through Durban, but with other sites located in Port Elizabeth and Cape Town and other facilities located around the country, notably in sugar and grain producing areas, where the company has commenced grain operations.
“Two years ago we bought into Free State Maize to acquire grain through the financing of farmers crops and given the warehousing capacity we have and envisaged improvements at Durban’s Port, we feel there is an export market we can tap into,” Opperman recalls. “In the last year we have also started to farm maize and beef cattle and in 2011 we planted 5,000 hectares.”
“We felt that whilst grain prices may fluctuate, there was an opportunity to start to produce grain on a large scale, but efficiently, using our Group knowledge and products. There are economies of scale involved and productive farming on a large scale increases profit margins. We want to handle up to a million tonnes of grain a year in South Africa eventually.”
Large scale business requires large scale transportation, something Opperman describes as “the backbone of the company”. Indeed Profert operates its own fleet of 35 trucks but that alone is insufficient and over a long period of time the Group has forged long-standing relationships with a number of logistics companies as well as utilizing the rail system.
“We manage logistics centrally from Durban and we run a logistics profit centre. Of course fuel costs affect our margins and we try to transport large volumes of bulk to make the venture more profitable,” Opperman reflects.
“Packaging plays a big role in that process and traditionally the fertilizer was transported in 50 kilogram bags but over the last three years we have a big drive to move away from smaller bags and pallets and into bulk handling.
“As a consequence there is a cost advantage and we can pass that on to our clients as the whole process is far more efficient and quicker and easier to load. We are also able to use mechanics rather than human labour.”
The relationship building with the logistics companies extends to forecasting to give the transporters ample notice of peak periods and volume of shipment and Opperman says that increasingly Profert is turning to computer equipment to work figures out:
“We have developed a data system which is still in the implementation stage but starts at farm level. Each farmer’s data is loaded into a central data base which is visible on an i-Pad. The agent can provide the farmer information on soil types, the land being used, the type of crop, the recommended fertilizer (and the amount needed) – all of this data gets sent to Durban and the order can be created.”
Quality control is also carried out in Durban where most of the fertilizer is mixed. Of as much importance is the environment and Opperman says that perceptions in South Africa are changing:
“We are concerned with building up soil quality and in the past there was a great focus on yield, but we realized that you need to look at the quality and quantity of the foods being produced and the link to soil. That is one of the reason why we recently also invested in Sienna Bionatec, a company that started out with two University professionals, who developed a business looking at micro-biotics and biological farming.”
He says that the next important stage in South Africa’s agricultural evolution is food security, something Profert is already preparing for through its enterprising, all-encompassing farm management system called ProGro.
“We see ourselves as leaders in this process that is designed to increase efficiency. The process starts with audits on the farm, from soil samples, to looking at the tillage practices, financial management and farm management. ProGro looks at the entire system and we are then able to make use of the various companies within the Profert group, to provide the best solution for the farmer. It is all about looking at soil potential and increasing yield and quality over time.”
If ProGro offers an exciting future for the farmer, developments at the Port of Durban offer equally exciting overseas opportunities, including the prospect of a grain terminal. The company’s fast-moving consumer groups cluster is another area Opperman earmarks for expansion, particularly as Profert starts to target retail wholesalers, while the animal supply business has huge potential across the African Continent.
All of which has Opperman excited: “We currently turn over revenue of around R4.5 billion a year and hope to grow that to R7 billion in the next two years,” he states. “The fertilizer business is pretty mature in South Africa but we are working quite extensively to grow our market share in the rest of Africa, in particular we have big opportunities in Zambia and Zimbabwe.”