SeedCo Limited weathers drought, delivers profit growth on exports and innovation

Listed seed processor, SeedCo Limited, reported mixed performance for the year to March 31, 2024 overcoming a difficult economic environment and El Nino-induced drought to deliver an 8 percent profit increase.

According to figures from the group, profit for the year came in at $463 billion from $374 billion in the prior year.

Overall sales volumes declined by nearly a third due to the drought, impacting maize and soya seed sales.

“The extensively publicised drought dampened cropping plans as farmers cautiously tried to curb the risk of crop failure because of moisture stress.

“Sales volume of the flagship crop, maize seed, was below prior year by nearly a third,” said group company secretary Tineyi Chatiza.

However, export sales increased significantly, generating much-needed foreign currency for the group and offsetting the declines recorded locally.

Wheat sales volumes remained flat despite challenges faced by farmers.

In terms of financial performance, revenue dropped 10 percent to $813 billion year-on-year due to lower sales volumes. Other income increased due to exchange gains on USD denominated receivables and increase in non-seed sales.

Despite the depressed volume performance, profitability improved 8 percent, primarily driven by exchange rate gains.

Operating expenses surged due to the current hyperinflationary environment as pricing index to the USD became the norm.

Finance costs decreased as a percentage of turnover, reflecting a reduction in borrowing rates. The company relied on borrowing to manage cash flow gaps caused by delayed Government payments and inflation.

The average interest rate year-on-year was 90 percent p.a. compared to 112 percent per annum in prior year.

According to the group, the profit share from the joint venture and associates was $25,78 billion benefiting from Seed Co International’s notable profitability recovery as well as exchange gain anchored profitability of the local joint venture, Prime Seed Co, and associate, Quton.

The Zimbabwean economic challenges, including hyperinflation and foreign currency shortages, impacted business activity. Delayed government payments created cash flow problems, and the drought dampened cropping plans and reduced demand for maize and soya seeds.

The seed processor continues to invest in research and development, introducing new drought-tolerant maize and high-yielding wheat varieties. The company is also expanding its export sales to mitigate the impact of lower domestic demand.

“The maize seed portfolio has been expanded with the release of SC661 and SC657, both medium-maturing hybrids. Additionally, a high-yielding wheat variety, SC W9104, has been introduced,” said Chatiza.

Going forward, the business maintains cautious optimism regarding Zimbabwe’s economic outlook despite prevailing challenges.

“The agricultural sector, a vital economic driver, is expected to improve with anticipated favourable weather conditions as El Niño transitions to La Niña in the upcoming season. Moving forward, the focus will be on increasing the contribution of exports and USD-denominated sales while ensuring competitive pricing and effective cost management.

“The business will continue to leverage its intellectual property by continuing to offer an optimal mix of seed varieties suitable for both drought and favourable rainfall conditions,” said Chatiza.-ebusinessweekly