Good weather, Govt programmes to sustain SeedCo
The improved weather conditions coupled with Government food programmes will support SeedCo Limited’s sustained demand for seed, driving further volume growth, according to analyst firm, FBC securities.
In its earnings review, the firm said SeedCo. remains the leading producer and marketer of certified crop seeds in Zimbabwe and has been able to defend its position as a market leader through its innovation and pioneering breeding methods.
“Improved weather conditions predicted for the rest of the year, coupled with government pro-grammes towards ensuring food security and envisaged growth in the agricultural sector, are likely to support sustained demand for seed, driving further volume growth,” FBC Securities said.
However, according to the review, the company’s increased appetite to borrow due to delayed payments from major customers and rising costs may exert pressure on margins given the increasing cost of borrowing locally.
The Securities firm said the counter has outperformed the benchmark ZSE ALSI and foreign currency parallel market exchange rate movements, demonstrating key value preservation characteristics in the face of inflationary pressures and currency volatility.
For the year ended March 31, 2023, SeedCo’s maize and soyabean seed sales volumes increased by 12 percent and 49 percent from the prior year, respectively, driven by heightened seed demand due to improved rainfall received and Government programmes aimed at ensuring food security supplemented by export opportunities across the region.”
Winter wheat sales were subdued when compared to the prior year, dropping by 7 percent, driven mainly by high input prices, an unreliable power supply and uncertainty around commodity producer prices,” the company said.
Revenue grew 455 percent to $38,22 billion compared to $6,89 billion in FY22 on the back of a 14 percent increase in sales volumes and selling price adjustments in response to inflation-induced increases in operating costs as well as the general effects of exchange rate fluctuations.
Other income increased due to exchange gains on debtors and non-seed sales. The group’s operating expenses rose steeply due to the prevailing hyperinflationary conditions.
Finance costs were at 26 percent of turnover, with an interest cover ratio of 4.4 caused by the unexpected hikes in interest rates that ranged from 80 percent to 200 percent per annum.
“The appetite to borrow was worsened by delayed payments from Government schemes and a sharp increase in prices for both operating expenses and seed deliveries,” the Group said.
Associate and joint venture operations made a negative contribution to the Company’s performance due to subdued sales volume growth.
Quton sales declined 10 percent, and Prime Seed sales were 18 percent below prior year due to the effects of the various challenges in the Zimbabwean economic landscape.
Seed Co. noted that uncertainty around commodity prices and the unreliability of the payment system for produce delivered to approved buyers had a direct impact on farmer interest in certain cropping lines, especially winter wheat production, whose condition was made worse by the absence of reliable power and water supply.
-ebusinessweekly
