Profit reduced to US$7.1 million
Revenue remained flat at US$88.5 million
- Total sales declined by 11%
Leading African seed producer, Seed Co International Limited's profits narrowed by 36% to US$7.1 million for the full year ended 31 March 2022 from a 2021 comparative of US$11.1 million.
The reduction in profitability is a result of gross margin shrinkage mainly in Zambia as the kwacha appreciated resulting in higher cost of goods sold, reduced economies of scale as volume declined by 11%, increase in operating costs and an increase in net finance costs largely attributed to rising interest costs.
Operating expenses increased by 6% to US$20.9 million from US$29.2 million in 2021 owing to the impact of the strong kwacha in Zambia, sales and marketing deployment in anticipation of a normal season and increases in logistical costs and general inflation on the cost of doing business.
In its full-year results presentation, the Group said revenue remained flat at US$88.5 million anchored by revenue growth in Mozambique albeit from lower margin legumes, local currency price adjustments and currency translation gains mainly out of Zambia.
Seed Co’s total sales for the year were 11% below the prior year with the main crop, maize down 19% due to the 50% cut of the government subsidy contribution in Malawi which also saw Seed Co Malawi volumes declining by 32% and late rains in Zambia and impact of price increases which dropped volumes in the country by 14% among others.
Under the Group’s joint ventures and associates, Seed Co West and Central Africa improved from breaking even in 2021 to registering a profit after tax of US$0.2 million in its second year as a joint venture.
The regional vegetable business loss, however, remained at the same level as in the prior year despite increasing revenue by 13%.
“Profitability was weighed down by pressure on margins on imported seeds and increasing cost of doing business,” the Group said.
Seed Co’s South African-based field crop partnership loss was also close to prior as the merged business finds its footing.
Meanwhile, the Group said despite the 19% decline in volume and 12% turnover reduction, the maize seed continued to dominate both revenue and volume contribution in all markets except in Mozambique.
Wheat seed sales for the period under review increased compared to last year while legumes (soybean and beans) increased from tender sales in Mozambique and open market sales in Zambia.
Going forward, the Group said its key focusing areas will be winter cereal sales, seed intake and processing, cash preservation and strategic deployment and cost containment in view of global uncertainty.
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