TWK Agri: Creating a Diverse Base for Growth

Any company over a period of time is likely to go through change. TWK Agri is the culmination of 73 years of hard work, political change and business evolution.

Today, TWK is a diversified agricultural company operating mainly in Mpumalanga, Kwazulu-Natal and the Eastern Cape but with much wider markets. The activities of the company and its subsidiaries include: marketing of forestry and agricultural products, handling and storage of grain, processing of forestry and grain products, provision of agricultural inputs, trade activities, financial and agricultural services and the provision of credit.

GrainBack in the beginning however, the company operated in a very different environment, as Tinus Potgieter, Executive Manager: General and New Business, explains:

“The TWK story is remarkable; the company grew from a very humble beginning in 1940 to the big agriculture company it is today. And the story is far from over.

“In 1940, 52 members of a Wattle Growers Association in Piet Retief gathered and registered the Transvaal Wattle Growers Co-operative Agricultural Company Limited. The primary goal of the cooperation was to promote the marketing of the timber and bark of its members.

“Although this was top priority throughout the years, the board of directors soon realized this should not be their only responsibility. Provision should be made to supply the necessary production materials and related to its members. From this decision more products and services were added on an annual basis and the organization experienced exponential growth.

“In 1982 the name of the cooperation was changed to the Transvaal Wattle Growers Cooperation Limited, abbreviated TWK. Then in 1997 the cooperation was converted to a company named TWK Agriculture Ltd.”

Today the company has become big business; last year the TWK Group turnover exceeded 3 billion Rand and employs roughly 1,700 people. Potgieter suggests that the company is experiencing continual growth.

TWK has become a major player in the agriculture sector in South Africa – especially in the Mpumalanga, Kwazulu-Natal and Eastern Cape provinces.

Slider 16gk-is-151Headquartered in Piet Retief, Mpumalanga, the company operates business from many different sites. In the Trade Division there are 36 branches throughout Mpumalanga, Kwazulu-Natal and the Eastern Cape, whilst the Timber, Grain, Motors and Tyres divisions all operate from a few different sites.

The Timber division is responsible for approximately 16,000 hectares of its own plantations, located across South Africa and Swaziland (where the sawmills are also based). There is a timber chipping plant in Richards Bay, from where products are exported. This division also operates a nursery which produces high quality forestry and vegetable seedlings. The Timber division oversees the marketing of the timber and manages the entire timber logistics process.

TWK’s Trade division includes 36 branches which supply a wide range of products to the agriculture market, including: fertilizer, seeds, chemicals and animal feed. This division also operates a fertilizer mixing plant in Richards Bay.

The Mechanization division includes several agency agreements for the supply of all agricultural equipment. Typically this division is responsible for the servicing of agricultural equipment and manufactures the TWK implement range.

The Grain division markets the company’s grain, with a particular focus on maize and soybeans. TWK possesses two Safex-registered silos for grain storage and this division processes the grain in two maize mills and animal feed mills.

TWK demonstrates its diversity by also operating a Motors and Tyres division which includes two Toyota dealerships located in Piet Retief and Standerton, whilst the company holds a majority share in Protea Tyres, a truck tyre retreading plant, based in Ermelo, but also operating four retail tyre outlets.

The company’s Insurance division acts as a broker for short-term, crop and plantation insurance and operates several agency agreements. The financial theme continues with TWK’s Financing division, which provides credit facilities to agricultural producers and support to TWK’s myriad of other divisions.

Potgieter says that turnover is pretty evenly split between retail sales and services (approximately 50 per cent) and the marketing of timber, grain and industrial sales. Whilst the company has a number of interests, he feels that agriculture will always remain at the heart of the business:

“As TWK is so diversified, our clients include the primary agricultural producer (farmer) which will always remain a very important focus area, the general public, wholesalers, retailers as well as big corporate companies.”

TWK is owned by approximately 460 shareholders, the majority of whom are producers in the agriculture sector. These shareholders obtained their shares when TWK made the transition from a cooperative into a company in 1997. None of the shareholder holds more than 5 per cent of the company.

From September of this year, the company is set to re-organise, as Potgieter explains:

“The shareholders have approved a corporate restructuring to be implemented on 1st September 2013 which will enable wider shareholder participation.  The rationale and objectives of the restructuring are to create a platform to enable existing TWK Shareholders to enhance and unlock value in the foreseeable future through the widening of the shareholder base of the TWK Group, improving the TWK Group’s ability to conclude transactions in which its shares are used as acquisition currency instead of cash. The changes will provide TWK Shareholders with a more liquid investment, whilst retaining control of the TWK Group for TWK Shareholders.

“The restructuring is also required to prepare for the BEE Transaction by creating a separate subsidiary which will house the businesses within the TWK Group that require empowerment.”

Any company with its focus on agriculture is likely to face a number of challenges due to the seasonal nature of their business and TWK is no different, as Potgieter explains:

“Seasonality does have a big influence on our business. In the Trade division we always need to ensure that the right products (e.g. seeds, fertilizers) are available at the right times.

“On the Financing side a large part of our credit facilities are provided to producers in the grain industry which will peak just before the harvesting season starts. Due to the geographical diversification of our retail branches and the different agricultural sectors we are servicing this seasonality can be managed, especially with excellent relationships with our financiers like the Land Bank.

“Operationally, the cost of transport and the limited availability of railways are big challenges especially in the timber industry. We mainly manage these challenges by selling to a diverse range of markets. Profitability comes under pressure if markets are not close enough to the areas where the timber is grown.

Slider 5gk-is-151“With TWK’s Head-Office in Piet Retief, in a rural area quite far from the big cities, trained and qualified personnel, especially from the historically disadvantaged group are scarce as there are many opportunities in the big cities. To overcome this, we focus on internal training programs and study assistance within TWK to develop our own people.”

Despite these challenges, Potgieter is hugely positive about the future for the business:

“We are constantly looking for opportunities to expand, grow our business and add more value to the agriculture industry. The launch of a new TWK corporate identity in January 2013 was a recent highlight. The new logo, slogan and look and feel were received very positively by our shareholders, staff, clients and suppliers.

“We are dedicated to research and development and with the help of FABI (Forestry and Agriculture Biotechnology Institute) where TWK is represented – we are actively involved in research by monitoring forestry diseases and pests. TWK also support research into forestry which is being undertaken by the ICFR.

“Even though there are always challenges, it is a good time to be in the agriculture sector. With a growing population in South Africa and globally, being involved in the sector primarily responsible for ensuring food security can only be advantageous.

“The growing middle class in our country creates a rising demand for products. As TWK and the producer play a major role in producing food and fibre, these factors probably lead to a period where the agricultural producer and agricultural businesses can perform better than other sectors.

“TWK has experienced annual growth and expect this to continue. For this we can’t just rely on growth in the sector, we need to focus on the needs of our clients and how we satisfy these needs.

“We have a bright future before us.  TWK’s vision is to achieve sustainable growth together. That goes beyond just growing our own business or income but includes the growth of our shareholders, clients, suppliers and staff and making a positive contribution to the communities in which we operate.  The objective is to make TWK the preferred supplier, employer and investment,” he concludes.