IH Securities forecast SeedCo Limited revenue to increase 31 pc in 2025
Stockbroking and equities firm, IH Securities, has forecast SeedCo Limited revenue to increase by 31 percent in FY2025 to approximately US$59 million on the rebound from the drought.
In its forecasts, IH said it smoothed EBITDA to strip out non-cash items under the assumption that these will be eliminated by the business’ change in functional currency to US$.
“We expect adjusted EBITDA margin to be elevated in FY25 benefitting from carryover stocks, before it moderates to 27 percent as costs begin to firm in US$. We anticipate the Group to close FY24 with a profit after tax of US$12,7 million,” reads the research note.
SeedCo in financials for the year to March 31, 2024 said the extensively publicised El-Nino-induced drought dampened cropping plans as farmers cautiously tried to curb the risk of crop failure because of moisture stress.
Moreover, the Government reduced traditional orders in favour of small grains.
“Consequently, sales volumes fell 27 percent year on year to 19,726 tonnes as maize and soya seed sales volumes were impacted.
“However, export sales increased notably and accounted for 11 percent of revenue, earning the business increased foreign currency while reducing the impact of lower local demand for seed,” the company said.
The group’s wheat sales volumes on the other hand remained constant at 6,041 tonnes in comparison to prior year despite challenges experienced by farmers.
Seed Co did not declare a final dividend in view of the uncertain local and global economy.
According to IH, the group has reiterated its commitment to research and development to drive its competitive advantage as the need for climate responsive products increases.
It noted that to this end, a new wheat variety and medium-maturing maize hybrids were released in Zimbabwe during the period.
“Although production is expected to reduce by 40 percent in FY25, SeedCo is holding adequate carryover stocks to meet local demand and export orders, the shipping of which has already commenced,” IH said.
It said management moving forward should increase the contribution of exports and US$-denominated sales while capacitating growers with irrigation infrastructure to secure production amidst global warming.
“In our view, Seed Co’s high exposure to government contracts continues to pose risk of payment delays given authorities’ prevailing tight leash on liquidity.
“The funding gaps created by these delays may force the group to borrow and incur increased finance costs, impacting on the bottom line,” the report noted.-ebusinessweekl
