IM’s last review of route-to-market fast-moving consumer goods counter CA Sales (CA&S) was in April 2025 at R17.50 with a target of R20 (+14%).
The counter hit a record high of R19.60 in mid-May and has since drifted, mainly, IM believes, on concerns over the softening of the Botswana economy, an important one to CA&S.
IM has consistently recommended CA&S, which operates in a range of African countries and has established a presence in East Africa.
The Botswana market has traditionally made up about 50% of annualised sales and 40% of profit. The small economy, driven by diamonds, has been a success story. However, diamonds are no longer a girl’s best friend; cheaper lab-grown alternatives and changing consumer tastes have led to a global collapse in naturally mined diamond demand, affecting pricing. This has hit the Botswana economy, where diamonds make up the majority of export earnings.
The economy was further weakened by a change of government after decades of relative economic stability and growth. The new socialist environment has rattled the corporate scene with many populist policies which, alongside weakening diamond revenue, have led to lower GDP expectations.
One of the reasons CA&S expanded its acquisition activity into South and East Africa was to wean itself off the heft of Botswana to its business. In interim 2025 results, Botswana saw flat revenue and profit performance, emulating the economy. It made up 47% of group revenue and 39% of profit, similar to past trends. Management plans to reduce this to 25%, focusing on East African market penetration and revenue growth alongside an aggressive push into Namibia, where oil and mining investment is surging.
For the six months to June 2025, CA&S group revenue rose 4% to R5.96bn, with operating profit up 9.6% to R335m. Headline earnings lifted 16.1% to 50.44c a share. The company does not pay an interim dividend.
Results were at the upper end of guidance but growth was a tad more muted than prior comparatives, primarily due to the flat Botswana contribution. The main results feature was solid growth in South Africa aided by prior acquisitions (a 49% stake in Roots), with revenue rising 13% to R989m and profit up 14% to R88.7m.
Namibian revenue increased 6% to R1.07bn, and profit surged 470% to R30m
The Namibian subsidiary was restructured after the 2023 acquisition of Taeuber & Corssen and CA&S sees strong growth potential in the country. In the period, revenue increased 6% to R1.07bn and profit surged 470% to R30m, with a target of R100m into 2026.
The performance was mixed in other key territories. Eswatini revenue rose 7% to R899m, with profits slipping 6% to R66m on consumer constraints. Other markets — encompassing Lesotho, Zambia, Zimbabwe and East Africa — saw revenue rising 13% to R175m and profit up 8.5% to R17.6m. In February 2025, CA&S took a 49% stake in the Tradco Group in Kenya, which brings in R1bn in additional revenue, of which only a token percentage was seen in the interim period.
The key CA&S growth spurt in the next few years will be the strategic push to sharply increase revenue and profit from East Africa. In time, management envisages the portfolio generating 50% of sales in Southern Africa (at present the majority) and 50% from East Africa. CA&S reiterated its R20bn revenue target for 2026; FY2025 revenue was R12.52bn.
CA&S was first recommended by IM after its unbundling from majority shareholder PSG Group in October 2022 at 545c, and has attained and exceeded every price target set. As IM writes this update after the year-end results to June 2025, CA&S is at R18.02 — giving a one-year gain of 22%. Client wins in the period added new products and business retail channels such as Lucky Star in Eswatini and KFC in Namibia alongside a major global confectionery brand, with increased channels in liquor and pet food.
CA&S traditionally has a better second half, given the pull of stock-building demand for the festive trading period. However, IM is cognisant that the Trump trade tariffs may have an adverse effect on many African countries in which it operates. Domestic expenditure may become constrained as exports are affected and need to be redirected. IM is also watchful of GDP indicators in Botswana, though CA&S is optimistic about year-on-year revenue and profit growth of 8% in the territory.
IM sees ongoing year-on-year group headline earnings growth of 20%, from the base of 122.7c a share reported in financial 2024. IM maintains a hold on CA&S.
The writer holds shares in CA&S
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.