- Seed Co reported a 93% increase in topline revenue, rising from US$37 million to US$71 million, driven by strong sales of maize and wheat seeds
- Profit from operations plummeted from US$49 million to US$21 million, primarily due to significant government debt and the transition to the US dollar
- Seed Co's export strategy has been crucial, with successful sales in key markets like Zambia, Malawi, and Botswana
Harare- Seed Co, Zimbabwe’s leading seed company with a robust regional footprint, reported a 52% surge in sales volume for the fiscal year ended March 31, 2025 (FY2025), driven by strong demand in both domestic and export markets.
According to its FY2025 financial statement, the company’s topline revenue soared from US$36.89 million in FY2024 to US$71.21 million, reflecting the success of its maize and wheat seed sales, which exceeded budget expectations due to heightened regional demand spurred by the previous year’s El Niño-induced drought.
However, despite this revenue growth, profitability declined significantly, with profit from operations dropping from US$49.02 million to US$20.67 million and profit after tax falling from US$21.19 million to US$17.53 million, a 17% year-on-year decline.
A significant factor impacting Seed Co’s financial stability is the substantial debt owed by the Zimbabwean government.
The government owes Seed Co approximately US$40 million for seed deliveries made over the past 18 months, accrued across various departments, including direct government entities, the Agricultural and Rural Development Authority (ARDA), the winter wheat program, and the Ministry of Agriculture.
This debt has plunged Seed Co into a severe liquidity crisis, as highlighted by CEO Morgan Nzwere during an analysts’ briefing, significantly affecting cash flow and daily operations.
The company has been forced to rely on borrowings to sustain operations, increasing finance costs and exacerbating financial strain.
The broader seed sector faces similar challenges, with the Zimbabwe Seed Association (ZAS) noting that the government owes over US$60 million to 11 seed companies, including Seed Co, for supplies from the 2022/23 and 2023/24 seasons.
These delays have hindered Seed Co’s ability to pay growers, with some demanding US dollar payments, further complicating financial management in a market where the government often pays in local currency at unfavourable exchange rates.
According to Nzwere, the transition to the US dollar as the functional currency in FY2025 necessitated a restatement of opening inventory values. This remeasurement increased the cost of goods sold to reflect true values during the conversion period, significantly reducing gross margins.
The adjustment was a one-time cost but had a substantial impact on operational profitability, as inventory costs were aligned with the new currency regime.
Operating expenses rose year-on-year, driven by currency distortions from FY2024, when Zimbabwe operated under the Zimbabwean dollar, and the costs associated with supporting higher sales volumes.
Inflationary pressures in Zimbabwe and the region further escalated operational costs, including labour, logistics, and administrative expenses, which eroded profitability despite the revenue growth.
“In FY2024, Seed Co benefited significantly from exchange gains due to the depreciation of the Zimbabwean dollar, which provided a substantial boost to its bottom line,” Seed Co’s chief executive officerMorgan Nzwere said in a statement accompanying the financials.
The shift to the US dollar as the functional currency in FY2025 eliminated this income source, contributing to the 17% year-on-year decline in profitability. This structural change removed a key financial cushion that had previously offset operational challenges.
The company’s reliance on borrowings to bridge cash flow gaps, primarily caused by delayed government payments, increased finance costs. While finance costs decreased to 5% of turnover in FY2025 from 10% in FY2024, they remained significant.
Long-term borrowings, including a Proparco loan guaranteed by Seed Co International, carried an average interest rate of 7.5%. Short-term US dollar borrowings averaged 13.5%, while short-term Zimbabwean dollar borrowings were at an exorbitant 40%, all unsecured, adding to financial risk.
Despite these challenges, Seed Co reported a profit share of US$3.8 million from its joint ventures and associates, driven by the recovery of profitability at Seed Co International and Prime Seed, as well as exchange gains boosting the local associate Quton.
However, this contribution was insufficient to offset the broader profitability decline.
The company’s Board declared a conservative dividend of US$0.0091 per share, reflecting caution due to liquidity constraints.
Regional operations
Seed Co operates in nearly 20 African countries, leveraging its regional presence to drive growth, particularly in export markets. Its operations span Angola, Botswana, the Democratic Republic of Congo (DRC), Ethiopia, Kenya, Malawi, Mozambique, Nigeria, South Africa, Tanzania, Zambia, and Zimbabwe, with additional focus on West and Central Africa.
The company’s export strategy has been pivotal in offsetting domestic challenges, particularly the El Niño-induced drought that reduced local demand in previous years.
Zambia is a significant production and export hub, with Seed Co exporting seeds since 2003. In FY2025, strong stock levels from the prior year enabled Zimbabwe to export 10,000 metric tons of seeds to cover regional deficits, particularly in maize, driven by demand following the El Niño drought.
Malawi and Mozambique also saw robust maize seed sales, supported by government subsidy programs and improved rainfall conditions in some areas. Botswana benefits from Seed Co’s drought-tolerant varieties, aligning with the region’s climate challenges.
In Eastern Africa, Tanzania and Kenya are critical export markets, with Seed Co International reporting a 20% rise in maize seed sales in FY2024, driven by government fertiliser subsidies in Tanzania and early seed uptake in Zambia.
In Kenya, Seed Co is involved in national policy setting and seed certification, enhancing its market presence. Ethiopia’s agricultural sector, reliant on maize and wheat, has driven demand for Seed Co’s hybrid varieties, particularly drought-tolerant ones like SC661 and SC657.
Seed Co is expanding its footprint in West Africa, with Nigeria as a key growth market due to its large agricultural base. The company’s distribution network in Angola and the DRC focuses on smallholder farmers, using tailored models like village-based sales agents and ambassador farmers to reach remote areas.
Strategically, Seed Co is well-positioned to leverage its regional presence and innovative seed portfolio. Investments in research and development, such as maize hybrids resistant to cob rot and fall armyworm, and infrastructure expansions in Tanzania and Zambia, enhance its capacity to meet demand.
The company’s focus on export markets and USD-denominated sales mitigates local market volatility, while its commitment to smallholder farmers through training and credit schemes supports long-term growth.
However, resolving the government debt issue and managing borrowing costs will be critical to unlocking Seed Co’s full potential.
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