Seed Co reports solid performance

Listed seed processor, Seed Co Limited International, has reported robust performance for the first five months of the current financial year, demonstrating resilience in a difficult economic landscape.

The company recorded a 10 percent growth in sales volume in Zimbabwe, primarily led by winter cereals such as wheat and barley.

This comes amid a challenging operating environment in Zimbabwe, characterised by liquidity constraints in both the local currency and the US dollar.

Despite the positive performance, the group is not immune to the external pressures inclusive of security issues in parts of West Africa, weakening regional currencies, rising inflation and interest rates, as well as the ongoing impact of the Ukraine war and bad weather.

However, management is confident the group will remain resilient despite the challenges.

“We are well prepared for the season and what the rainfall forecasts are saying,” said Seed Co in a trading update, in response to negative weather forecasts made.

As for its regional operations, the company experienced a 70 percent volume growth, led by early sales in East Africa and a strong market in Mozambique.

Despite the economic headwinds, its vegetable seed business continues to show profitability.

The firm attributed its improving margins to an increase in US dollar denominated sales, which helped offset the devaluation of the local currency.

Transactions in the country are now largely towards the US dollar accounting for over three quarters according to figures from the Zimbabwe National Statistics Agency (ZimStat).

Additionally, Seed Co reported in a trading update that the regional vegetable seed turnover was 5 percent higher than the prior year, although margins have been affected by weakening currencies against the US dollar.

On the research and development front, Seed Co has stated that their products consistently outperform competitors in independent trials.

The company has several projects in the pipeline, including maize varieties that are tolerant to MNLD and cob rot, as well as ongoing trials for sorghum and pearl millet in Senegal.

As for working capital, the company has already collected 60 percent of its year-end receivables and expects to collect the rest by the end of October 2023.

They noted that their total stocks available for the current season are more than adequate to meet forecasted demand and are 36 percent higher than in the previous year.

Looking ahead, the company is preparing for the El-Nino weather phenomenon, which is expected to bring reduced rainfall to Southern Africa but more rainfall to East Africa.

Seed Co plans to leverage its diverse range of seed varieties to mitigate the impact on sales.
East Africa, particularly Tanzania, is expected to see normal to above-normal rainfall, boosting early seed demand in the region.

Furthermore, the company noted that Mozambique remains an exciting new market, and Ethiopia has just granted a non-conditional operating licence, opening the door for sizable inception sales.=ebusinessweekly